World Economic News
UK Financial Regulator Worried About Insurance Losses
"The Financial Services Authority (FSA) has ... contacted all UK-registered insurers to find out about their liabilities, and whether they have enough reserves to meet their obligations," Thisismoney.co.uk reported Sept. 12. The FSA oversees the United Kingdom's financial institutions. Thisismoney.co.uk stated, "Insured losses for Katrina [are] now estimated at between $25 and $60 billion."
Swiss Re, the large re-insurance company, reported Sept. 12, that it has now more than doubled its estimate of its own losses to $1.2 billion, from $500 million just a few days ago. Catlin Insurance reported that its net losses would reach $125 million. Munich Re, one of the world's largest reinsurance companies, announced that it is increasing its "loss estimates," without disclosing a specific figure.
The issue is whether these insurance companies have sufficient reserves, and second, that these large losses hit an insurance and re-insurance sector that is very vulnerable. The insurance companies are the counter-parties to a large number of collateralized debt obligations and various derivatives, which suffered a seismic shakeout during the May-June period of this year, arising from the flash-fire of S&P's downgrading GM and Ford in May. The hurricane losses could cause trouble in the insurance sector so that it transmits, domino-style, instability and failures to the derivatives market, and vice versa.
Income Collapsing in Philippines
The Asia Development Bank has found that, despite sustained GDP growth in the four years ending in 2003, real average family income in the Philippines has fallen 10%, and total income of the poorest 10% of the population has stagnated, Agence France Presse reported Sept. 13.
The report also indicates that the billions of dollars of cash transfers by Filipino contract workers have little effect in improving living conditions for the country's poor. The Philippines central bank reports that some 8 million overseas Filipino workers will send home $9.4 billion this year via formal banking channels, up 10% from 2004 levels, making the Philippines the third-highest recipient of remittances from emigrant workers, after India and Mexico.