All Forum Posts by: Michael Masters

Florida rocked by home insurance crisis: ‘I may have to sell up and move’ (msn.com)

I'd love to compare it to my own model, shoot me a copy if you like.

@Michael M.

Sorry, replying to myself even though I said it was my last post, just want to point out two things:

1). Note that although I believe in global warming and its effects, I have no expertise in whether or not it is man-caused and have made no statements on that. Not my area of expertise.

2). I meant to say frequency of SEVERE hurricanes is increasing and the severity of those storms is increasing.

Promise my last post this time.

@James Hamling

Here’s my final post on this subject as no one is changing minds here and I don’t wish to cause any ill will, which I admit to getting close to last night.

Again, my JOB is to do exactly what you said. Adjust data for ALL the ways society has changed over the years to determine risk. In fact, I run the team that does this for a multibillion dollar company. So I’m not just stating things and leaving people to wonder, I’ve actually worked with models around these storms. I too have an engineering degree but now specialize in statistics, which we all know can be bent to serve someone’s purpose.

All those factors you mentioned are important. As I said in my original post, inflation was just one factor. Also in the opposite direction, the way structures are built these days make them much less susceptible to damage. I was keeping it simple because often it becomes overwhelmingly confusing.

Factoring all these in, storms are just more frequent and more severe these days.

Again, this IS my day job. Not to push any agenda, but too look at all these factors and assess the risk.

To the original poster, my assessment is based on 35 years as a pricing actuary (experts in bringing together stats and real world together factors). In fact, I’m experienced enough and knowledgable enough at it that I run the department.

If people would rather go by what they see on TV or hear in their social circles, where stats are bent for a purpose, feel free.

@Bruce Woodruff

No, I’m supplementing the 97% of scientists with my own knowledge of the data, which I shared a bit if above. That cats have increased dramatically over the last 20-30 years. Not opinion, fact from working with the data in my job for the last 30 something years.

But you and the 3% of scientists can believe whatever crap you want.

@Bruce Woodruff

Agreed, some scientists may have wrong motivations. Follow this link:

https://en.wikipedia.org/wiki/Surveys_of_scientists%27_views_on_climate_change

It shows that by a large margin scientists believe the evidence that climate change is real and that humans are contributing. (90%+, numbers change depending on the survey).

I’ll believe the vast majority of scientists, and ignore the small percent who disagree for whatever reason.

Precisely.  This is because the people who give the loans do it based on this year's bonus structure, not to ensure that the company doesn't lose money 10 years from now.  

Hey Aaron,

My day job is as an actuary.  Specifically, I am a Chief Pricing Actuary which means its my job to manage the team that prices insurance risk.  I do not price based on politics, I price based on facts and hard data.  My company is a specialty insurer, which means we sell policies where others fear to tread.  As you may guess, we do a lot of business covering Florida property.

Follow this link to insured losses since 1970:

https://www.swissre.com/media/...

Look at the left side of the chart then compare it to the right.  Clearly the risk of catastrophe losses has greatly increased and continues to increase.  Even after adjusting for items such as inflation this is clear.  Premiums for Florida are currently blowing up.  Companies are being forced to increase deductibles while paying twice last year's premium.  Those who own individual homes may not see the bite as Florida insurance regulators protect them from such increases, but these additional costs will eventually make their way through to those policies as well.

Count me as one of the few who considers global warming in my real estate purchases.  As an example, the city of Boston put out a report showing which neighborhoods would be impacted by various increases in sea level, I used this to decide which areas to stay away from.  I do this because I have a buy-and-die strategy, which means I hold it until it passes on to the next generation.  If I was only in it for the short term I may not care about these climate changes.

Again, I couldn't care less about the politics, facts are facts.

Good point.  Also, some lenders require you to have enough cash liquidity saved up to make payments for 6 months and in some cases up to a year.

Admittedly I kinda cheated on my liquidity for one of my MF, I took money out of my 401k and put into my savings account. Once the deal was done, I rolled over the savings into a new IRA. The money must be in a new IRA before 3 months pass from the withdrawal date.

Funny, I was going to say the same exact thing!