January 8, 2013
Much of the Northeast was not fully prepared for Superstorm Sandy, and its effects will linger for some time. But one industry largely headquartered in the
Northeast had been preparing for the storm for years: the insurance industry.
Since Hurricane Andrew in 1992, the insurance industry has been taking steps to reduce its exposure to catastrophe losses –ironic, considering that insurance companies are supposedly in the business of insuring them. As a result, insurance companies made record profits in the immediate aftermath of Hurricane Katrina and in recent years have kept enormous surpluses, despite 9/11 and the overall economic landscape.
The ultimate lesson from Katrina accordingly is simple. The time has come for consumers, courts and state regulators to stop insurance companies from protecting themselves from catastrophe losses. It is time for them to start protecting their policyholders instead.