Adverse Possession Insurance: A Post Subprime Mortgage Crisis Necessity?

Given that a large number of banks in the US have lost their recently repossessed real properties via adverse possession, is adverse possession insurance now a post subprime mortgage crisis necessity?

By: Ringo Bones

It might only be a “luxury problem” for the upper echelons of the socio-economic ladder, but adverse possession can be a serious issue to real property owners given that belligerent homeless people have used preexisting adverse possession laws and statutes in various states in America for “legalized squatting” purposes. Could the establishment of an adverse possession insurance remedy such a predicament? But first, here’s a primer on what this adverse possession and its rather nebulous legal rigmarole is all about.

At the height of the subprime mortgage crisis in America, many “legal jurisprudence savvy” homeless people had resorted to adverse possession as a way to possess a new house without paying a single cent. After all, given that most preexisting adverse possession laws in the U.S. allows belligerent squatters to legally occupy and own foreclosed property – i.e. a hose and lot – if the bank who now owns it didn’t report a break on to the local law enforcement agencies concerned.

Like it or not (you certainly won’t if you own the “legally squatted” property), adverse possession is a process by which premises can change ownership. It is governed by statutes concerning the title to real property – i.e. land and the fixed structures built upon it. Strange as it may seem, statutes of limitation in most U.S. states allow an adverse possessor to acquire legal title if the owner does not seek timely possession.

Adverse possession consists of actual occupation of the land with the intent to keep it solely for oneself. 

Merely claiming the land or paying taxes on it, without actually possessing it, is insufficient. Entry on land – whether legal or not – is essential. A trespass may commence adverse possession, but there must be more than temporary use of the property by a trespasser for adverse possession to be established. Physical acts must show that the possessor is exercising the dominion over the land that an average owner of similar property would exercise. Ordinary use of the property – for example, planting and harvesting crops or cutting and selling timber – indicates actual possession. In some states, acts that constitute actual possession are found in statute. An adverse possessor must possess land openly for the entire world to see, as a true owner would. Secretly occupying another’s land does not give the occupant any legal rights. Given that such defines adverse possession, how can adverse possession insurance prevent one from losing his or her own real property to a “belligerent adverse possessor”?

Well, insurance companies could model their adverse possession insurance policies, or an “adverse possession risk insurance” policies after preexisting kidnap and ransom insurance policies because both are primarily designed to work in a “risky environment” given that there is very little difference between kidnappers and belligerent adverse possessors as both are utterly devoid of respect for other fellow human beings’ life and property. I mean the legal precedents for establishing one are already there, right?

Awareness and prevention clause could be added to an adverse possession insurance policy, especially to real property located in “high-risk areas” – i.e. ineffectual local law enforcement agencies and largely unenforced local real property laws and statutes. And let’s not forget a reimbursement clause where financial reimbursement of the true owner of the real property subject to a adverse possession event by a belligerent individual or individuals that may require either a regional court-sanctioned armed intervention by specialist security contractors or a lengthy legal court proceedings up to the agreed policy limit. 

Pet Medical Insurance: A Luxurious Necessity?

Given that in most affluent parts of the world veterinary medical treatment of one’s beloved pet often cost more than a typical human’s medical treatment, should one get a pet medical insurance to keep pet medical expenses a bit more bearable?

By: Ringo Bones

Unless you own a show dog whose prize money winnings is enough to pay for premiums for a self-insurance policy to keep skyrocketing medical expenses of your beloved pet a bit bearable, now is a good time as any to shop for a medical insurance for your pet with premiums you can afford and a coverage that’s right for your pet. Pet medical insurance may be a luxurious necessity in our current austere fiscal global environment where a typical human with a minimum-wage job can on the best of days just barely get by. After all, if ever you want to place a price on your pet’s love for you, a pet medical insurance is a good - and quite utilitarian – place to start.

Hong Kong residents often bemoan the price of veterinary treatment in their neck of the woods which on average tends to be 2.5 times more expensive than a typical human’s medical treatment. So owners could have their pets seen as a status symbol if they are in relatively good health – and seen frequenting a posh veterinary clinic.

In the more affluent countries of the European Union – like Germany – if your dog needs to have a hip replacement, veterinary facilities exist that could surgically replace your dog’s ailing hip joint with a brand new one made of medical grade titanium and plastic for around 3,000-euros. The price includes the X-Rays and the specialist fee. Strangely enough, during the 1960s – artificial hip joints intended for medical use were tested on dogs to look out for unforeseen medical side-effects. This is the reason why most veterinarians today can easily learn how to surgically replace artificial hip joints on ailing dogs because the procedure was routinely done with a high degree of success during the 1960s and the procedural steps have since been extensively documented.

Some veterinary practitioners routinely perform canine blood transfusions in their clinics on dogs that need them because knowledge on the different blood types of dogs and related treatments were already extensively documented by medical researchers over 50 year ago during their use of dogs as laboratory test animals. If such “advanced” veterinary procedures become the norm in the near future, will the premiums for medical insurance for one’s pets eventually come down to the level of mass affordability?

Kidnap And Ransom Insurance: Legalized Protection Racket?

Even though it is already freely advertized on-line and many insurance companies provide such policies, but is kidnap and ransom insurance nothing more than a “legalized protection racket”?

By: Ringo Bones

One of the fundamentals that had been laid out by the increasingly globalized insurance business since its establishment was that the first essential factor in insurance is that the element of gambling must not be present. But what if a certain insurance policy involves a sort of tacit contract of indemnity between the insurance company and the criminals doing the criminal act that needs to be insured? Does this make the supposedly “legitimate” insurance company now involved in the complicity of a criminal act? Have you ever checked out some of the policies defining these so-called kidnap and ransom insurance?

A lot of insurance companies plying their “kidnap and ransom insurance” wares on-line seem to have reach a salient consensus in their policies’ themes. Some extolling that kidnap, ransom and extortion insurance should form a part of contingency planning or risk management for any international company whose personnel work in emerging markets designated as “high-risk” as defined by the US State Department or other related global security watchdogs. According to insurance companies selling kidnap, ransom and extortion insurance, “Your employees may be seen as legitimate targets for kidnap and ransom demands”. But what if there’s some kind of collusion between the kidnap and ransom insurance providers and the actual criminals doing the actual kidnapping, abduction, extortion and what have you? Does this mean that we’re screwed?

If anyone out there with concerns like mine, they are totally warranted because of the very definition a typical kidnap for ransom insurance policy is often executed. Like one of the most valuable services that a kidnap and ransom policy can offer is the provision of a crisis management team to handle negotiations and assist with all activities involved in a kidnapping case. So what if the highly trained kidnap and ransom responders are just complicit with the actual criminals doing the actual abduction?

And wait till you hear the “confidentiality clause” about how kidnap, ransom and extortion insurance providers operate a strict policy of non-disclosure of client details. Does this mean there’s also a non-disclosure agreement between complicity of the kidnap and ransom insurance provider and the actual criminals doing the actual kidnapping and extortion?

Unlike insurance companies that issue fire insurance that support the Underwriters’ Laboratories or similar organizations involved in research and other activities actually doing something to reduce fire losses and spur fire prevention, insurance companies that issue kidnap, ransom and extortion insurance don’t seem to be supporting the local law enforcement agencies of the supposedly high-risk countries that their policy holders work. And there’s that moral hazard that it just seems too tempting – not to mention all to easy – for the insurance companies that issue kidnap, ransom and extortion insurance policies to just be complicit with the local criminal elements in order to stealthily fleece their clients with the law enforcement groups concerned being none the wiser.

So is the kidnap and extortion / ransom insurance nothing more than a legalize protection racket? Well, most of them probably provide an honest service but it is all too easy to turn a typical kidnap and ransom insurance clause into a fraudulent scheme, enterprise or even a criminal activity for profit. Given that if these kidnap, ransom and extortion responders employed by the insurance companies that issue kidnap and ransom insurance do the actual groundwork of actually doing old-fashioned legwork in order to identify the rigmaroles of the local kidnap for ransom enterprise of these high-risk business destinations, does this mean that abduction risk will be further minimized making such kidnap for ransom insurance policies just seem so unnecessary?

Will The EU’s New Insurance Gender Equality Laws Affect Women’s Driving Behavior?

While supposedly making EU insurance laws more or less gender neutral will the latest EU court decision on gender equality geared EU insurance laws affect women’s driving attitudes in the EU?

By: Ringo Bones

Unfair stereotype or not, the statistical correlation of young women drivers aged 18 to 25 being safer than their male counterparts is not easy to overlook. But will the latest European Union Court ruling to make insurance premium pricing laws gender neutral across the EU eventually change current safety-conscious attitudes of EU citizen drivers?

The new EU law outlawing gender discrimination in the pricing of insurance premiums in the vehicular / car / driving insurance front could make women drivers in the EU face a sharp jump in the cost of their driving insurance premiums by as much as 40%. And according to Aidan Kerr of the Association of British Insurers, the sharp rise in car insurance premiums of women drivers in the EU would certainly affect their safety conscious driving attitudes down the road if they now pay the same insurance premium rates as their male counterparts.

Not only driving insurance premium rates will be affected. The latest European Union Court ruling on gender neutral insurance premium pricing will also affect life insurance and pension annuity premiums. Women in the European Union will be paying up to 30% more on their life insurance premiums despite recent scientific studies showing that women in the EU tend to live longer than their male counterparts in a statistically significant manner. Whether it is due to genetics or due to an inherently risk averse behavior, anyone – male or female – who live longer and pay for their life insurance premiums for much longer due to their longevity do deserve lesser premium rates. 

On the “losing” side, EU men now could face to collect 10% less on their retirement income of their pension annuities due to the new EU insurance gender equality laws. Although, the policymakers that legislated the new EU insurance gender equality laws seems to be silent on how all of this will affect the inherently safety-conscious attitudes of EU women drivers who now have to pay the same increased car insurance pricing premiums as their male counterparts in the near future. Is it just an unjust law that defies current scientific findings?

Are The World’s Fast Growing Economies Underinsured?

Given that they are prime investment destinations during the past few years, are the world’s emerging economies really underinsured for long-term economic viability?

By: Ringo Bones

A recent report by the Centre for Economics and Business Research shows that recent actuarial figures had shown that emerging economies – especially the fast growing economies of India and The People’s Republic of China – are just too underinsured for long-term economic viability. Given such sobering facts, does this report serve as a “caveat emptor” to all prospective investors?

Richard Ward, CEO of Lloyd’s of London had been concerned on the recent report because in most underinsured economies – it is the government who spend a disproportionate amount of money in terms of compensation and disaster relief in times of natural disasters. Given that the cost of natural disasters had increased by 870 billion US dollars since 1980, prospective investors should probably do their due diligence first before doing business with such countries – especially given such countries still consider climate change mitigation schemes as an “iffy luxury” only rich Western countries can afford.  

Even though 2011 was still the costliest year in terms of insurance payouts due to natural and man-made disasters, the future might even be more costly especially if the potentially disastrous effects of climate change risks are taken into account. And given that the world’s underinsured fast growing / emerging economies will surely be skimping on “iffy luxuries” like climate change risk insurance and/or weather derivatives, it could undermine the “investment attractiveness” of these potential investment destinations.

Weather Derivatives: The Big Business Side of Climate Change Risk Insurance?

Even though its been freely traded on the Chicago Mercantile Exchange for awhile now, are weather derivatives now represent the big business side of climate change risk insurance?

By: Ringo Bones

Many of us cope with life’s risks in a myriad of ways. Those who are more financially savvy tend to monetize those risks and cash in the name of financial compensation. Given that its been exchange-traded with its corresponding options on the Chicago Mercantile Exchange - or CME – since 1999, are weather derivatives now representative of the big business side of climate change risk insurance?

To many of us not yet part of the richest 1 per cent may be abhorred of such a wealth manipulation scheme being used to monetize the risk posed by climate change, but from an actuarial perspective, such complex derivatives does play such a vital role in making the agricultural industry in the United States and the rest of the industrialized world be able to cope with risk and other catastrophic uncertainties posed by climate change. For the benefit of the uninitiated, here’s a brief discussion on what are weather derivatives.

Weather derivatives are financial instruments that can be used by organizations or individuals as part of their risk management strategy to reduce risks – mainly financial – associated with adverse or unexpected weather conditions. Weather derivatives’ difference from other forms of derivatives is that the underlying asset – namely: rain / temperature / snow – has no direct value to the price of the issued weather derivative. Weather derivatives are more often than not classified under “exotic derivatives”.

Farmers can use weather derivatives to hedge against poor harvests caused by failing rains during the growing period, excessive rains during harvesting, high winds in case of plantations or wild temperature swings in cases of greenhouse-enclosed crops. Theme parks now also use such derivatives to insure against rainy weekends during peak summer seasons and gas and electrical power companies may use heating degree days (HDD) or cooling degree days (CDD) contracts to smooth their earnings. A sports event managing company may wish to hedge their earnings losses by entering into a weather derivative contract because if it rains the day of the sporting event, fewer tickets will be sold.

The first weather derivative deal was in July 1996 when Aquila Energy structured a dual-commodity hedge for the Consolidated Edison, Co. The transaction involved Con Ed’s purchase of electric power from Aquila for the month of August. The price of the power was agreed to, but a weather clause was embedded into the contract. This clause stipulated that Aquila would pay Con Ed a rebate if August turned out to be cooler than expected.

After that humble beginning, weather derivatives slowly began trading over-the-counter in 1997. As the market for these products grew, the Chicago Mercantile Exchange introduced the first exchange-traded weather futures contracts – and their corresponding options – in 1999. The Chicago Mercantile Exchange (CME) currently trades weather derivative contracts for 25 cities in the United States, 9 cities in Europe, 6 cities in Canada and 2 cities in Japan. A major early pioneer in weather derivatives was the Enron Corporation through its Enron Online unit.

There is no standard model for valuing weather derivatives similar to the Black-Scholes formula for pricing European style equity option and similar derivatives. That is due to the fact that underlying asset used in valuating weather derivative contracts is non-tradable which violates a number of key assumptions of the Black-Scholes Model. Typically, weather derivatives are priced in a number of ways: via business pricing, historical pricing or burn analysis, index modeling, physical models of the weather and a more superior approach through a mixture of statistical and physical models. 

Tropical Storm Sandy: Every Insurance Companies' Nasty October Surprise?

Had been dubbed as the “Frankenstorm” since it arrived in U.S. territorial waters, does the exorbitant insurance payouts of Tropical Storm Sandy’s devastation be the nasty October Surprise for all insurance companies concerned?

By: Ringo Bones

As Tropical Storm Sandy, despite being classified as a “mere” Category I Hurricane since it arrived in U.S. territorial waters, it had since been dubbed Frankenstorm by the press and is fast becoming the meteorological phenomena of the decade as it sparked scientific interest as the preexisting weather in the East Coast of the United States conspired to create a thousand-mile-wide “perfect storm” hitherto unseen since meteorological records began. While the “famed” storm is still strengthening, will Tropical Storm Sandy be the October Surprise to the insurance companies concerned currently still ill prepared to cough-up monstrous pay-outs?

“Super-Storm” Sandy’s devastation had indeed been unprecedented so far in the U.S. East Coast. Though tragic deaths in such natural disasters is considered one death too many, Sandy’s death toll had reached 20 in the United States as it claimed 69 lives when it hit the Caribbean last week – with Haiti, Jamaica and Cuba being the hardest hit. Even Cuban president Raul Castro is still visiting the other far-flung areas in Cuba devastated last week by Tropical Storm Sandy. And don't forget the actuarial cost of those hundreds of commercial scheduled flights in the US East Coast that had to be cancelled in the wake of  Tropical Storm Sandy. Though from an actuarial perspective, the frequency of occurrence of such once-in-a-lifetime "perfect storms" / "Frankenstorms" are still exceedingly rare.  

With insurance payouts via flood insurance and storm damage insurance claims alone projected to reach well over 20 billion US dollars, Tropical Storm Sandy managed to close the New York Stock Exchange for two days now. The last time the NYSE was closed for this length of time was back in 1888. In terms of infrastructure damage, the state of New York could be the hardest hit so far as the New York City’s subway system are now flooded by as much as 4 feet of seawater and most of its power grid had been shut down by Sandy. It even caused a fire in Queens, New York that destroyed 50 homes while neighboring states, like New Jersey, had been brought to a virtual standstill when storm surges flooded main roads making them impassable by conventional road vehicles.