Higher insurance and reinsurance prices may be linked to new RMS catastrophe model

Louisiana Insurance State Farm customers in northeastern Louisiana may soon be paying more for their homeowners insurance as the company looks to state regulators for approval of a rate increase of 19.5%. The insurer claims that higher rates are the result of recent fires, tornados and other natural disasters occurring in the state. Insurance Commissioner Jim Donelon says that he has never before experienced such a steep increase in insurance rates, especially in the northern part of the states that are not often subject to such rate increases.

The rate at which insurers are raising prices may have its roots in the reinsurance industry. This year has become notorious for the number of vicious storms and catastrophes that have impacted most of the country. Reinsurers have been raising rates on the coverage they offer to insurance companies as a way to mitigate losses due to these catastrophes. As reinsurers raise their rates, insurers must do the same to stay financially solvent.

Both industries may be affected by the coming catastrophe model from Risk Management Solutions. The risk modeling firm will be releasing their latest natural disaster model next year and the model shows that many inland properties may be subject to damage from hurricanes and other phenomenon that are usually related to coastal properties. If this is the case, then Louisiana, as well as other states along the coast, may see more rate increases in the future.

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