Page 22 - APRIL2025

Page 22
Real Estate
By Jim King neWfounD insuRance
It’s become a topic of con-
versation everywhere. Insurance
premiums are going up for ev-
eryone, whether you have had
a claim or not. It seems at the
best irrational and quite frankly
unjust and unfair – and that’s all
NEWFOUNDLAKELIFE.COM
Your Insurance Guy
April 2025
true – at least the unjust and un-
so they buy re-insurance from of profits is going to elicit sym- February 2025
NEWFOUNDLAKELIFE.COM
Lloyds of London or Swiss RE. If there is a major event that causes catastrophic losses such as the recent fires in CA, the pri- mary insurance company, State Farm as an example turns to Lloyds of London for reimburse- ment for the payment of claims by clients. The same things hap- pens if there is a hurricane and flooding in Florida, Lloyds of London has to reimburse the primary insurance company, perhaps Liberty Mutual, for a percentage of their claims paid out. Going back to our “truism”
-
insurance companies don’t lose
fair part.
Not that it will help but I
wanted to offer some back- ground as to why insurance pre- miums are increasing at what seems and astronomical rate. We are seeing year over year rate increases of 10%, 15% and in some cases 20%.
So, let’s start here, there is one truism when it comes to in- surance, insurance companies don’t lose money, at least not for long. The rate increases we have seen are an effort by the insur- ance companies to get back to
pathy from anyone, nor should it but it is a fact. Insurance compa- nies have been losing money for the last few years and premium increases are their way of getting back to profitability.
So, why have insurance companies been losing money? There are two primary reasons, Climate Change and Nuclear Jury Awards.
Let’s take Climate Change first. Everyone’s first reaction is “Climate Change”!? What has that got to do with me? Well, di- rectly, not a lot but indirectly, a
profitability. Not that their lack
lot. The recent wildfires in Cali-
fornia as well as the hurricanes in
Florida affect everyone because
all insurance companies are in-
terconnected through a hidden
web called “Reinsurance”. In-
surance companies don’t want
to be fully responsible for all of
the insurance policies they write
money, Lloyds then increases their reinsurance premiums to the primary insurance company (State Farm or Liberty Mutual as in our examples). One well known national insurance com- pany shared that their reinsur- ance costs had increased 85% year over year. The primary insurance companies then pass those additional costs along to their customers, sharing the pain if you will.
In the case of “Nuclear Jury Awards”, the same market dy- namics apply. If there is a cata- strophic loss, Lloyds reimburses the primary insurance company for a portion of the loss and then raises their reinsurance rates to recover from the loss. The pri- mary insurance company when faced with increased reinsurance costs then raises the premiums of all of their customers.
What are “Nuclear Jury Awards you may ask? Check out
the recent award made by a jury to someone that was burned by a cup of tea at a Starbucks take- out window in Ca. without get- ting into a discussion about who was “at fault” here, the fact is the jury awarded the injured party $50M. The insurance company that insures Starbucks will have to pay the $50M and Lloyds of London will have to pay a por- tion of that.
That is how Climate Change and Nuclear Jury Awards are major contributors to the rising cost of insurance for everyone.
Please feel free to call us with any questions or concerns about your insurance coverages. We are happy to help. We are here to answer any questions. You can reach us at 603-744-5000 (yes, we do answer the phone) or email us at info@newfoundins. com
Alternatively, please visit our web- site www.newfoundins.com
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Rates start at only $80 per month
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