Scottish Widows have said that life and protection rates are likely to rise in the aftermath of Hurricane Katrina. They have predicted that rates will be raised in both the UK and the US.
Three weeks after the hurricane that devastated New Orleans and surrounding regions, Standard & Poor's has put 10 insurance groups on negative credit watch. Specialist reinsurers, Alea and Goshawk both announced that they will need to raise more capital as a result of the hurricane.
Swiss Re's estimate of the amounts it could have to pay out has risen from £275 million to £660 million.
Scottish Widows believe that as many of the reinsurers in the UK are US owned, there will be an impact on the cost on life and protection insurance for consumers.
Our view
This does not seem logical and seems to go against the principal of shared insurance risk, the lucky people who do not have to claim technically pay out to those that have to claim.
It would appear a ready admittance that insurers are cross subsidising and investing in the wrong areas i.e. each other!