Managing catastrophic risk: getting beyond the insurance crisis; The incidence of catastrophic risk has increased markedly, and insurance rates have risen with it. Some companies are re-examining the issue of self-insurance or even doing without and using their equity base to cover potential risks.(Cover story)

Financial Executive, January, 2007 by Millman, Gregory J.

It probably won't come as a surprise to the average reader of the day's headlines, but statistically, the world is getting riskier--and insurance scarcer. "I think there is a crisis," says Robert Muir-Wood, chief research officer of Risk Management Solutions (RMS), one of the leading risk modeling firms.

Eighteen of the 20 costliest catastrophes since 1970 have occurred after 1990, and 10 of them after 2000. Risk modeling firms have raised their estimate for the frequency of hurricanes, and the more intense storms are increasing more than less intense storms. RMS's estimate of the loss from a 100-year storm has risen almost 50 percent, Muir-Wood says, from $70 billion to $105 billion. One reason: economic demand surge, that is, the rise in prices for materials...

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