Amy,
OT- Insurance
Two weeks ago our home owners insurance was canceled, effective November 30th. The company explained that they were lowering their risk exposure to hurricanes. Working through an agent (our agent said he didn't represent any companies that would write a new policy in our county), we finally found a company that would write a policy for only one year, and they were only writing 1000 policies in our county. The new agent said that homeowners insurance for coastal counties in Florida may end up being a government program, that every insurance company is lowering their risk profile.
Lowering of risk is not limited to insurance, the banks won't make the same loans they would a year ago, investors won't buy the same stocks with "potential", that they would a year ago, PE's are lower, corporate bonds require a higher premium, risk free treasuries pay very low rates.
These things feed on each other. As banks, insurance companies and investors become more risk adverse, there is less potential for growth, which increases risk. Leading to more risk aversion.
I think 9/11 provided a psychological backdrop for avoiding risk, and intensified a typical end of business cycle risk aversion. The threat of war certainly isn't helping. Deficit spending and the subsequent decline in the dollar adds to the problem.
How do you turn the cycle? Ya got me.
John |
