I know that catastrophes can and sometimes do, bring insurers down. With Chile, it seems - as far as we know - that the VR losses are going to be manageable.
Insurance accounting is so arcane. Some losses are always allowed for by the reinsurers. How, and how much and where, I'm not so sure. It's possible a lot of the monies are in an off-balance sheet item. This may be so for assumptive reinsurance (all items removed from asset and liability on the corporate balance sheet). From Wikipedia, "Assumption reinsurance is a form of reinsurance whereby the reinsurer is substituted for the ceding insurer and becomes directly liable for policy claims. This ordinarily requires a notice and release from affected policyholders. In the more typical reinsurance arrangement, the reinsurer has an obligation to indemnify the ceding insurer, which remains liable for claims on policies it has issued, and policyholders' approval is not required."
I'm going to assume it's not critical for me to understand all this accounting jargon. Of course, maybe if I had such knowledge in some previous bets on insurers, I might have saved myself from some losses. I'll just stick with p/bk, dividend, history, margins, etc., and also not making just one big bet on one insurer (reinsurer). |
