Prediction Held up
Boomhauer: Major property insurers are not expected to fail near term
“We're not at the point yet where You know, we expect major failures of property insurers.”
Assertion Supported
Boomhauer: Proprietary insurer catastrophe models are impossible for objective third-party evaluation.
“Almost all of the models that are applied by insurers today are developed by for-profit private companies. It makes them all a little bit of a black box. It makes them all basically impossible for objective third parties to evaluate”
Insight
Boomhauer: Rising frequency of outlier weather events stresses insurance markets
“We've I think, and it's also not so much Any individual exceptional event, it's the rate at which the exceptional events are coming, right? We're having a lot of them things that used to be complete outliers are happening with greater and greater frequency, an…”
Prediction Not checkable as stated
Boomhauer: Property insurance prices will rise and carrier equity returns will suffer.
“What is likely in the short run is that prices are going to need to go up. Returns to the equity investors in these companies that, that have equity investors are not going to be good.”
Opinion
Boomhauer: Insurer market withdrawals are ad-hoc reactions to imperfect disaster data
“There is also absolutely a sense of kind of reactiveness here that something bad happens and let's get out of the place where the bad thing is happening. And that I agree that there's this ad hoc, a little bit of an ad hoc sense to it, but fundamentally I thin…”
Insight
Boomhauer: Limited liability creates a moral hazard for insurers against buying reinsurance.
“One question that you might ask if you're an insurance company is, well, reinsurance is expensive and difficult to buy. Why should I care if I, as a company can't pay my claims in a given year, then I'm going to go bankrupt and that's terrible for my policyhol…”
Insight
Boomhauer: Parametric policies solve major contracting friction in insurance
“Parametrics solve a lot of the contracting problems that, that exist in any insurance market, be it climate or not climate.”
Insight
Boomhauer: Parametric insurance must balance basis risk against indemnity complexity
“The challenge is it introduces what's called basis risk. So what if a hurricane of, with wind speed, you know, X minus epsilon strikes? That's probably still not great for me as a homeowner, but the parametric policy is going to give me no coverage because we …”
Assertion Supported
Boomhauer: Capital is persistently failing to enter reinsurance markets
“If you look at people that study reinsurance, they're, the persistent fact is there's not a lot of capital entering these markets”
Assertion Supported
Boomhauer: Escalating disaster losses over past decade are driving up insurance premiums
“We have these Increasing trends in disaster losses from all kinds of events, from floods, from hurricanes, from wildfires, from severe windstorms and hail, and we have seen really big increases in aggregate losses from those things, particularly in the last 10…”
Insight
Boomhauer: Disaster risk requires simulation models due to thin historical records
“Natural disaster events are just fundamentally different because we, you know, thankfully have not had a thick enough historical record of disaster events that we can price these things using the statistical methods that are standard in other lines of insuranc…”
Insight
Boomhauer: Modeling rare disasters requires centuries of nonexistent historical data
“If you have a disaster that occurs with a one quarter of one percent probability in, in a given year, in order to really nail down the expected annual losses from that kind of event in a given place, you need hundreds and hundreds of years of data, and we just…”
Insight
Boomhauer: Correlated disaster risks break the law of large numbers for insurers
“One of the fundamental differences between disaster insurance and insurance for other risks is that these are risks that are correlated, right? And so imagine being an insurer who's writing insurance policies for everyone who lives in a given city. If you're c…”
Insight
Boomhauer: Insurers rely on reinsurance because internal surplus capital is too costly
“We think about insurers trying to protect their solvency, and one way that they can do that is that they can hold a bunch of surplus capital within the firm, but that's an expensive thing to do, to, you know, basically put capital in low-risk investments to be…”
