Ep. 97: Inflation and Reinsurance - a Better Way

The Inflation Guy sometimes gets distracted by shiny things. Today, he was distracted by an article sent from a listener, detailing comments from the CFO of Travelers Insurance about the increased reinsurance the company is employing as a hedge against inflation risks to its property and casualty (P&C) businesses.

This is an illuminating comment, showing both that (a) insurance costs are going up not just because insured property values are rising, but also because the cost of reinsuring is rising as inflation risks rise; and (b) major insurance companies are still not hedging inflation risk in P&C businesses with inflation hedges but rather through increasing reinsurance coverage. That's inefficient, and the Inflation Guy explains why.

Insurance and inflation! What could be more interesting than combining those two exciting topics?

 

NOTES

Article: Inflation on insured values main reason for Travelers extra reinsurance protection, says CFO

Blog Post: Inflation Sherpa

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