I was an underwriter for both the Hartford and Firemans Fund. The Hartford had the bulk of the Great Chicago fire losses and the Fund was almost wiped out by that big earthquake (ironic that it's headquartered in SF...)
Both companies survived by making deals with the policyholders for pennies on the dollar. Because of huge losses like that, international pools of reinsurers came to be.
Lloyds is a fairly small player as far as placed insurance goes, but it is one of the biggest ratemakers. And its pledge of unlimited liability for its members has been put to the test. By now they may not have unlimited liability any more, but I don't know. I placed a lot of reinsurance and saw both rates and retentions skyrocket when I was in the business. In ocean marine we also insured war, and boy was that a lot of fun when the Suez Canal was closed. I don't have any connections in the business any more, but I am curious how war coverages are doing lately.
Anyway, if the insurers do go under, and things like New York's fund run out of money, there just isn't any money around. The Feds don't have any obligation to bail out insurers, or to make good on claims. Everybody is on their own.
Now, there have been things like Sandy, where around here uninsured beachfront properties were sort of replaced by FEMA mainly because said uninsured owners whined like little babies. Of course, there have been catastrophes like New Orleans where the common good is served by the government spending money, and some Sandy expenses were certainly justified. But, should the implausible failure of the entire San Andreas fault happen, or that huge megavolcano in Yellowstone go off, there just ain't no money to rebuild. From anyone.
Anyway, values right now are astronomical and there really isn't any cash around for a really big loss. CAT covers may be becoming a joke, and basically a gamble that a catastrophe won't happen.
Back in the 60's, when I got my first insurance job, it was noted that fire-resistive premium rates were so low that all the premiums generated in NY State would not have paid for one NYC high rise if it was totaled. We were betting on none being totaled. Or at least putting 50 years of premiums in the bank before a bog one.
You ran the numbers, so you know how companies asses their risk and try to limit coverage in some areas. And I guess you know that when we get that big hit we're in trouble.
It's 2:30 in the morning and I'm rambling...
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