Insurance Losses Growing From Meltdown Of Financial Markets
Losses from the subprime mortgage collapse are finally catching up to the insurance industry.
“The collapse of the subprime mortgage market will lead to record losses for insurance companies, overtaking Hurricane Katrina, the worst natural disaster in U.S. history.”
Insurance losses to date from the subprime collapse is estimated at $38 billion and is expected to surpass the $41 billion the industry paid out for Katrina.
American International Group, the world’s largest insurance company has been the hardest hit so far with writedowns exceeding $11 billion. Even more troubling has been the losses for the bond insurance industry which have caused severe disruptions in the normally placid bond markets.
This has caused a spillover effect to the rest of the financial sector as many institutions have had to writedown losses due to bond revaluation in their asset backed portfolios. Municipalities are finding it especially hard to issue new debt even with their stellar default history.
While the insurance industry has historically fared better the other business sectors during a recession, even it has failed to escape the virus of the subprime mortgage collapse that has infected so much of the economy. With credit markets steadily growing worse it’s not known how high these losses could rise.
