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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: carranza2 who wrote (16694)	1/25/2009 6:43:52 PM
From: RockyBalboa	Read Replies (1) \| Respond to of 71456

Thanks for the light bulb ... I tried to put that what we have here (in Europe) in somewhat sloppy terms. To be more concise: In property insurance business "overinsurance" can technically occur. This is correct if the insurance policy exceeds the time value of an asset, like a house, or a car. The insurer can claim overinsurance and therefore cut the compensation to the replacement value or time value according to a policy.In Europe there is a similar regulation ruling out "enrichment" or an ecomomic gain from a settlement. Also one can not insure the same property twice unless one carrier assumes subsidiary coverage, or insurance fraud is committed. In CDS world all that does not apply. It is no problem to overinsure a 4B bond issue some 10 or 20 times. It pays off to slaughter a company (or have bought directors doing the job) and collect a multiple times of the defaulted bonds from the insurers. As I said this is only possible with cash settlement instead of delivering a defaulted issue which would effectively limit the compensation amounts to the real economic damage.