Hurricane Katrina is likely going to have a global impact on insurance rates. "People at Lloyds are still afraid to quote reinsurance prices, but it's clear to everyone that three years of falling insurance prices are over," according to Yitzhak Klein, managing director of Inbal Insurance.
Klein spent the week in London, meeting with Lloyds of London executives ahead of renewing the government company's annual insurance contracts. The visit came on the heels of Katrina.
While the damage from the hurricane is unknown, estimates hover around $100 billion. It's unclear what part of that is insured - for which insurance companies would have to bear the burden - but it's certainly a serious amount. Thus, the storm is likely to push insurance rates higher.
This uncertainty has caused Lloyds to avoid providing quotes for renewing the insurance contracts. Lloyds is exposed to damages in the New Orleans hotel, shipping and casino industries.
Although Klein has argued Israel is not exposed to hurricane threats, the damage caused by Katrina to the profits of reinsurers like Lloyds, which provides insurance for local insurance companies, will ultimately have a global impact on prices. However, it is unclear how much rates will rise, according to Klein.
The last general increase in insurance rates occured after the September 11 attacks. Since then, prices have steadily fallen to the point where they are at or even lower than pre-September 11 levels.
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