Berkshire Hathaway is pulling back from the property insurance space

Lloyd’s insurance claims - Home office building

Lower claims and financial losses are good news for insurance providers

This year, damage caused by natural disasters has gone down, which has provided property insurance providers with some breathing room in terms of claims payments. While some countries have experienced fairly catastrophic disasters, these events have been somewhat mild when compared to what the insurance industry had to deal with last year, according to a report from Munich Re. Though claims payments are going down, so are premiums, which means that insurers are still seeing some financial stress in the property insurance space.

Lower premiums are causing some insurers to limit their exposure

For Berkshire Hathaway, as well as other property insurance providers, fewer claims and fewer disasters is good news, but premiums have also been falling, which means less profit for insurers. As profits fall, Berkshire Hathaway is beginning to pullback from the property insurance sector. The report from Munich Re shows that, worldwide, natural disasters have caused some $35 billion in losses, of which $12 billion was insured. This is lower than the $95 billion in losses that were seen during the first six months of 2014.

Number of natural disasters is on the rise, but their cost is going down

property Insurance industry news Lloyd's of London Home OfficeWhile the damage caused by natural disasters is down, the number of catastrophes is up. There have been 510 catastrophic events recorded in the first six months of this year, up from the 440 that were reported during the period in 2014. In the United States, the worst disasters can be found in California, with the state’s extreme drought, as well as Texas and Oklahoma with extreme flooding.

Underwriters are instructed to reject inadequately priced risks in order to avoid exposure

Berkshire Hathaway underwriters are instructed to reject all inadequately priced risks, which has had the insurer pullback from the property insurance space in order to mitigate losses. While the insurer is backing away, there are still many policies available in the property insurance sector and competition in the market remains relatively strong. This competition is one of the reasons that insurance premiums have been dropping slightly in recent years. For coastal properties, however, premiums continue to rise.

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