New Orleans will never recover

[Mandinka2]

I think the better bet is to address comprehensively the levee issue. It is easier to deal with preventing floods and draining water than to raise an entire city, right? (I am guessing here but it seems to make sense...)

Yes , raising a city is perhaps beyond even the US's ability .... especially considering global warming.

There is a federal flood insurance program that provides insurance for high risk flood areas (much of FL, etc). This program covers the first $250,000 in flood damage. By retaining that risk, the government makes it possible for private insurance to provide coverage at workable rates above and beyond that $250K. (Think of it as having a really high deductible to lower your payments, only you don't have to pay the deductible).

From an investing standpoint, what usually happens post-crisis is wealthy individuals and private equity corporations unveil insurance products to serve the new higher rate market. (This happened post 9/11; several bermuda based insurers came into existence). Since existing insurance companies have no choice but to raise rates, these new entities enter the market at lower (but still high) rates, and the new entities have no exisitng liabilities.

From my understanding many of the Bermuda based reinsurers are in trouble over this , XL Re , Partner Re etc. are all nat cat specialists but are of nothing like the size of Munich Re or Swiss Re.... interesting times ahead for the industry.... consider as well that this is only the START of the hurricane season .... you will see very big rate hikes in the near future I believe.

 

[MattTheSkywalker]

Yes , raising a city is perhaps beyond even the US's ability .... especially considering global warming.


From my understanding many of the Bermuda based reinsurers are in trouble over this , XL Re , Partner Re etc. are all nat cat specialists but are of nothing like the size of Munich Re or Swiss Re.... interesting times ahead for the industry.... consider as well that this is only the START of the hurricane season .... you will see very big rate hikes in the near future I believe.

You and your insurance talk. We almost got an office in the Swiss RE building in London (the gherkin) but instead are setting up a few desks on the floor at Lloyd's.

I agree, it is an interesting time; good opportunities for institutional investors. I think the transactions that got the Bermuda guys in trouble were "finite risk" transactions...purely "balance sheet smoothers" without any real risk transfer. Are you going to the 19th Reinsurance Congress (in Bermuda) by chance?

Hope things are well.

 

[FreeballinDC]

I think the better bet is to address comprehensively the levee issue. It is easier to deal with preventing floods and draining water than to raise an entire city, right? (I am guessing here but it seems to make sense...)

I heard a report on the radio this morning that engineers from the Netherlands have volunteered their services to show American engineers how to build dykes instead of levees for NO.

Also, has anyone heard from rnch?

 

[gotmilk]

The governors of the several states control the National Guard. The US Army is under federal control.

Governors do not control the National Guard. They have the ability to call on the National Guard.

My dad's Engineering Unit returned from Iraq not long ago and now have orders to head South for 6 weeks. Probably will be a few weeks before they actually leave because all their equipment is still in Iraq

 

[Mandinka2]

You and your insurance talk. We almost got an office in the Swiss RE building in London (the gherkin) but instead are setting up a few desks on the floor at Lloyd's.

I agree, it is an interesting time; good opportunities for institutional investors. I think the transactions that got the Bermuda guys in trouble were "finite risk" transactions...purely "balance sheet smoothers" without any real risk transfer. Are you going to the 19th Reinsurance Congress (in Bermuda) by chance?

Hope things are well.

That's a real nice building - the Gherkin , I havent been to the Lloyd's building in a few years - it used to be owned by the Deba fund I remember.

My understanding is that much of the industry is in trouble over Finite re and fin re deals .... it is currently the largest single project in my employer here - something like $30m a year. General Re are the worst affected I believe but don't tell Mr. Buffet.

No chance for me in Bermuda this year i fear , i was there two years ago in the Southampton hotel for a week (actuarial conference) and swore I'd never go back - all the money in the world but you're still in the middle of nowhere. I'll catch up with you in London one day I'm sure.

EDIT: You never told me what sort of business you're covering in London... would be curious to know...

Ps. Things with me are as ever frenetic but I'm pretending that I'm ignoring it.

 

[redguru]

Governors do not control the National Guard. They have the ability to call on the National Guard.

My dad's Engineering Unit returned from Iraq not long ago and now have orders to head South for 6 weeks. Probably will be a few weeks before they actually leave because all their equipment is still in Iraq

That's what I meant, they can call upon the guard in situations such as these.

 

[SC4EVA]

Some points from me
1. Most people dont seem to have this flood insurance everyone speaks of
2. I think most people who were too poor to leave and were shipped to other states are going to stay where they were taken
3. From a co-workers brother who is a cop in NO (who left b/c he wanted to guard the families house in garden district) - it appears as though the "famous" areas, bourbon st, garden district, etc were not really hit as hard and was mostly redisential areas.

Upset never got to go - 2 weeks ago was debated Halloween there!

 

[toga22]

So, yes, there will be insurance, and as long as there is insurance, there will be potential investors. But I don't think people will have the desire to live in NO, so the demand will never meet the supply....which is why I say the city may never recover.

Thanks for the explaination Matt!!

And unforunately, I do agree with you.. It will be very interesting to see what develops over the next few months.

 

[rsnoble-im-back]

this was my prediction even before Katrina hit. As many others im sure.

 

[toga22]

this was my prediction even before Katrina hit. As many others im sure.

Prediction, meaning for the fate of New Orleans? Unfortunately, NO is a city I have only spent a couple day in on business, and really didn't seem much outside of quick tourists attractions and the company I was there on business for.