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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 4
I thought this USA article on expected damage versus hurricane strength was worth sharing. The graphics mid-way the article are pretty clear - from mild to total destruction. Recovery periods from days to months.
https://www.aol.com/uninhabitable-weeks-months-why...Of course, this is not off topic with respect to BRK insurance and reinsurance operations.
It's also interesting to me that recent hurricanes are springing up in the Caribbean or Gulf rather than the Atlantic. That doesn't keep them from becoming powerful quickly. September, usually the highest month for Atlantic hurricanes has seemed pretty quiet this year - not what was expected.
No. of Recommendations: 9
There seems to be little interest in hurricane Helene - which is OK by me. But I do suggest that BRK shareholders not ignore it.
It seems to be heading into a relatively sparsely populated part of Florida, so that's good news. However, it is already forecast as a Class 4 hurricane with potential for further development. Also it is a fast moving hurricane, which means it will reach further into landfall than normal. Heavy flooding as far north as Tennessee could result into significant inland flooding problems.
Maybe I'm preaching into the wind and everyone is already aware of this. If so, sorry for wasting your time.
No. of Recommendations: 2
There seems to be little interest in hurricane Helene - which is OK by me. But I do suggest that BRK shareholders not ignore it.
I'm assuming and planning that BRK's insurance operations have priced in and accounted for these types of events. If they haven't, then we have something to worry about. But we won't know that for a while. Not much to discuss in the meantime, except I hope everyone is safe and sound.
No. of Recommendations: 13
I thought this USA article on expected damage versus hurricane strength was worth sharing. The graphics mid-way the article are pretty clear - from mild to total destruction. Recovery periods from days to months.
https://www.aol.com/uninhabitable-weeks-months-why...
Of course, this is not off topic with respect to BRK insurance and reinsurance operations.There has been a spate of media reports lately about approaching headwinds, or maybe crosswinds, in the worlds of insurance and reinsurance due to the increasing frequency and severity of extreme weather events related to climate change.
U.S. Sen. Sheldon Whitehouse, chairman of the Senate Budget Committee, warns that what insurers and reinsurers call pricing power and consumers call inflation is escalating at a rate that will cause upheaval in the industry as fewer ordinary people are able to afford the cost, forgoing insurance altogether and leaving a smaller base to underwrite growing risks.
Whenever I travel to Miami, I am baffled by the continuing massive investment in new construction by the water's edge. Perhaps I am being alarmist, but I just don't see how that ends well.
Climate change tests the insurance industry and could lead to the 'next big economic shock' for the U.S.
(Yahoo News)
Earlier this month, Senate Budget Committee Chairman Sheldon Whitehouse of Rhode Island held a series of meetings in Florida on the topic of skyrocketing insurance rates. At a panel discussion in Hollywood, he issued a dire warning about what he called “the next big economic shock that is going to clobber the U.S. economy.”
With insurance becoming unaffordable or unavailable, Whitehouse said, the next shoe to drop is “the mortgage market going into crisis, because if a property is uninsurable, that property is unmortgageable. And then that mortgage crisis cascades into a property values crash.”
No state has been hit harder by the unfolding insurance crisis than Florida, a peninsular bullseye consisting of 8,436 miles of heavily developed coastline that each year tempts hurricanes and tropical storms. Residents in Florida pay four times the national average for homeowners insurance, and the cost of premiums has risen there by more than 40% over the past year and a half. That’s no real surprise given that in 2022, a single storm, Hurricane Ian, killed 150 people and caused a record $112 billion in damages when it made landfall on the Gulf Coast.https://www.yahoo.com/news/climate-change-tests-th...Rise Of The Insurance Apocalypse
How climate change is breaking down the global safety net for handling life’s risks.
(The Lever)
But as climate change intensifies extreme weather and claims pile up, this system has been thrown into disarray. Insured losses from natural disasters in the United States now routinely approach $100 billion a year, compared to $4.6 billion in 2000. As a result, the average homeowner has seen their premiums spike 21 percent since 2015. Perhaps unsurprisingly, the states most likely to have disasters — like Texas and Florida — have some of the most expensive insurance rates. That means ever more people are forgoing coverage, leaving them vulnerable and driving prices even higher as the number of people paying premiums and sharing risk shrinks.
This vicious cycle also increases reinsurers’ rates. Reinsurers globally raised prices for property insurers by 37 percent in 2023, contributing to insurance companies pulling back from risky states like California and Florida. “As events are getting bigger and more costly, that has raised the prices of reinsurance in those areas,” said Carolyn Kousky, the associate vice president for economics and policy at the Environmental Defense Fund, who studies insurance. “It’s called the hardening of the market.”
In a worse-case scenario, this all leads to a massive stranded asset problem: Premiums get so high that property values plummet, families’ investments dissipate, and banks are stuck holding what’s left.
More simply, the global process for handling life’s risks is breaking down, leaving those who can least afford it unprotected.https://www.levernews.com/rise-of-the-insurance-ap...It is only fair to point out that this second article comes from The Lever, an online publication founded by David Sirota, a left-leaning investigative journalist who co-produced the satiric climate film "Don't Look Up" and once wrote speeches for Bernie Sanders. A 21% increase in homeowner rates since 2015 seems quite moderate compared to, say, the price of eggs. The $4.6 billion figure for insured losses from natural disasters in 2000 is cherry-picked from a variable list of annual totals to make the change to today seem more extreme:
https://www.iii.org/table-archive/20922That said, there does seem to be an extraordinary amount of investment in and migration to coastal areas on the front lines of sea level rise and fiercer hurricanes.
I remember asking an insurance investor some years ago what the effects of climate change-related extreme weather events were likely to be on property and casualty insurers. He told me the purely economic effect would be to harden pricing, a good thing for investors. Back then, he did not envision a point at which large swaths of people would no longer be able to afford insurance at all.
No. of Recommendations: 2
There seems to be little interest in hurricane Helene - which is OK by me. But I do suggest that BRK shareholders not ignore it.
What should Berkshire shareholders do about it? In general, what should they do before or after each major hurricane?
No. of Recommendations: 7
Thanks for your posts and reminders on this, Tex. Insurance is now and always has been the most important component of Berkshire. Anything re: Insurance matters a LOT.
We always need to keep an eye on these storms. And not just for ReInsurance and P&C.
An underrated impact of these storms is on auto insurers, including GEICO. As this storm heads north following land impact—it will deliver very strong winds and rain to higher population areas.
Just as hail storms usually bring far higher total dollar claims than tornadoes—these “thousands of modest dollar” auto claims from storms like this—can ring up big total dollar claims.
No. of Recommendations: 1
Hurricane damage cuts two ways, it seems. Yes, the prospect of Berkshire paying out damage claims is adverse to the company and our equity valuation in the short term. Yes, the paying out of claims is usually good for Berkshire in the long run and thus also good for our equity valuation as the payment of these claims leads to higher future premiums and sometimes less competition because of the weaker players being hurt more than Berkshire by hurricane events. In the twenty-plus years we have held Berkshire shares this has been the usual oft repeated cycle.
Our friends with homes on NC and SC beaches have seen significant insurance hikes in the past two years. It appears the hikes are having some effect on beach property prices as they soared during the Covid years and now seem to be receding slightly. As to be expected, property prices are influenced by many factors including location, availability, interest rates, qualified prospective buyers, the fear/greed level of sellers and so forth. Still, the comments I am hearing are giving some evidence the significant increases in insurance costs are pushing into the fear zone for our friends on fixed income (retired) who currently own beach property.
To repeat, adverse storm events are slightly adverse in the short term and usually quite profitable in the long term for Berkshire.
Uwharrie
No. of Recommendations: 9
"the comments I am hearing are giving some evidence the significant increases in insurance costs are pushing into the fear zone for our friends on fixed income (retired) who currently own beach property."
I have 3 waterfront properties. I no longer carry wind and just self insure. All the homes are built for Cat 5 winds. Flood insurance is very cheap since it is subsidized by the Federal Government. Capped at $250k of damages.
Newer waterfront homes built at the right elevations and to the highest standards are in very high demand. I have turned down two unsolicited offers on my latest build on Marco Island.
The older homes and condos are falling in price. No one wants the risk.
No. of Recommendations: 1
“To repeat, adverse storm events are slightly adverse in the short term and usually quite profitable in the long term for Berkshire.”
That’s my take as well from WEB’s commentary over the years. Short-term pain but long-term gain for the Strong.
We have no interest in owning a coastal house but love the Gulf & Atlantic beaches. My buddy in Clearwater,FL area moved 15 miles from Belair to right on the bay (sunsets are truly spectacular) and his rates on the new house are 3x what they were vs. his more inland house which he sold a year ago. He has chosen not to have flood insurance. My brother says his homeowners premium on his coastal GA home on the marsh is now over twice his Nashville primary residence.
No. of Recommendations: 3
Hurricane Helene is going very close to the path of Hurricane Debby from August.
Hurricane Debby was responsible for by some estimates $12B in damages. But much of it was in areas that were not FEMA flood zones and thus most homeowners did not have flood insurance.
https://thehill.com/policy/energy-environment/4825...As of September, Florida insurers had totaled $121M with 60% of cases closed. Most homeowner insurance cases due to Debby were closed with not payment.
https://www.insurancejournal.com/news/southeast/20...With Hurricane Helene obviously a bigger and more powerful storm, the question is going to arise. How many new flood insurance policies were issued in the past two months? And will there be more windstorm damage, which would be covered under standard homeowners insurance.
No. of Recommendations: 3
It is only fair to point out that this second article comes from The Lever, an online publication founded by David Sirota, a left-leaning investigative journalist who co-produced the satiric climate film "Don't Look Up" and once wrote speeches for Bernie Sanders. A 21% increase in homeowner rates since 2015 seems quite moderate compared to, say, the price of eggs.
Not just eggs. There has been 32.8% inflation since 2015, so if insurance rates are really up 21% in the same time period, they have become cheaper, not more expensive.
dtb
No. of Recommendations: 4
There seems to be little interest in hurricane Helene - which is OK by me. But I do suggest that BRK shareholders not ignore it.
There is nothing BRK shareholders can or should do about it. It's part & parcel of our insurance business; and we have a genius Ajit Jain, who is the best insurance CEO in the world running it. And whatever the loss is, BRK can easily handle it & even profit from it by writing a ton of new business soon afterwards when everyone else is pulling back. So just relax!
