Dividends and Munich Re says 2021 was 2nd most costly year on record for world’s insurers

If you own an insurance company, you would want to pay out something, but not too much. You business is giving peace of mind for an annual premium and hopefully you would not pay out. A perfect client is one who paid, used preventive measures and never claimed. However with climate change, it is the climate changing all over the place and extreme temperatures often lead to extreme desire for claims at the insurance companies. In the world of insurance company company, the company underwrites the risk and then shares the risk with reinsurer companies and the biggest in the world is Munich Reinsurance of Germany.

In an article by Tom Sims and Alexander Huebner of Reuters, Munich Reinsurance gave their annual briefing on the world on reinsurance.

Insured losses from natural catastrophes totalled around $120 billion in 2021, second only to $146 billion in 2017 which many hurricanes caused damages.

Ernst Rauch, chief climate and geo scientist at Munich Re said the 2021 are striking because some of the extreme weather events are the kind that are likely to become more frequent and more severe as a result of climate change. (or the 100 year story is likely to come again before 100 years).

The result of the frequency means insurance companies have begun to raise rates and in some places that damage is coming too often stopped coverage. The issue for the government is what to do with the people that live in the area?

Linking to dividend paying stocks, every industry has a business strategy, in the insurance company case it is to pay, but do not pay too much and have a clear definition of what too much is. It is one of the reasons many consumers do like insurance companies (a great example is the movie The Rainmaker based on a John Grisham book – in the book the Tom Cruise character cross examines the insurance executive and claims manager about procedures at the company). The point is to understand how your investments make money and how they do not. Then you can determine if the company how the company is doing in every business cycle.

There are more questions than answers, till the next time – to raising questions.

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