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American International Group, Inc. Message Board

  • cash2go cash2go Aug 27, 2008 3:39 PM Flag

    Hurricane problems coming?

    Kiplinger Report:
    Another Consequence of the Subprime Mess?

    Some homeowners, in default and holding properties that aren't worth the outstanding mortgage balance, already are walking away. A few even torch their properties to collect the insurance payout, and a major hurricane or other catastrophe could provide cover for fraud. From arson to padding claims or slipping in unrelated damage, post-catastrophe insurance fraud is nothing new, but it's not clear how well insurers grasp the potential increase in exposure, given the current economic climate. They may know their customers' credit scores, but they may not know how many properties are foreclosed and sitting empty, or mortgaged with subprime loans that are about to overwhelm the borrowers.

    According to Marshall & Swift/Boeckh LLC (MSB), too many insurers also don't know the true replacement value of their portfolios, with some 66% of insured properties undervalued by an average of 18%. For homeowners not already in default, an inadequate post-catastrophe insurance payout may leave them no choice but to go into foreclosure -- adding to the stock of vacant properties that represent a different category of risk to their insurers.

    http://www.kiplinger.com/businessresource/summary/archive/2008/hurricane_credit_AMBEST.html

 
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