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Just a few remarks from first principles.

It's hard to criticize the reinsurance industry for covering its arse. After all, the precautionary principle ought indeed to dominate in this industry. Hard to criticise them for being wrong in their projections, because the best science available isn't very good.

Your argument seems to be that they commissioned and used voluntarily alarmist projections to raise capital and profiteer with it. But this isn't the only interpretation. If there had indeed been a wave of expensive hurricanes in the last few years, the picture would be different.

BUT in any case, the problem is that they are the wrong people to be doing reinsurance. As a first guess, it should be a sovereign function, with a global re-reinsurance system...

In the case of Florida, and more acutely Louisiana, undoubtedly home owners and the economy would have been better served if the states occupied the reinsurance role. But ... would you trust them with the money?

If insurance companies are going bust and/or charging unaffordable premiums, it's because they are not capable of accurately predicting or covering the risks. In the end, government may have to enter retail insurance, because the risk of having a big proportion of uninsured property would seem to be unacceptable...

This would perhaps have the advantage of obliging the federal government to intervene as reinsurer in case of major disasters.

The risks are way too big and unassessable to be left to the magical market.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Mon Nov 1st, 2010 at 07:59:59 AM EST

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