I don’t mean to seem heartless. I genuinely sympathize with the people of Hawaii who’ve been driven from their homes by the volcanic eruptions. However, I look at the volcanic eruptions much as I do at mudslides in California or floods on the Mississippi. Kilauea has been erupting for 50 years. It wasn’t a surprise.
This has been a terrible year for insurance companies. In Hawaii homeowners insurance covers damage due to volcanic eruptions so most people are covered. What may be the case, however, is that, similar to the situation with the mudslides in California, housing inflation in Hawaii has been quite rapid and people may not be carrying enough insurance.
Don’t be surprised if premiums start rising and don’t be surprised if insurance companies have some financial problems. You can’t have that much damage of very expensive homes without its becoming a problem for the insurance companies.
Cascade effect when the assets that backed the policies prove over valued?
Memory says — i.e., I saw this on the internet but don’t recall just where — that the residential districts currently in danger from Hawaii’s volcanos are chiefly lower middle class neighborhoods, so the insurance companies are somewhat protected. Of course if there’s an eruption big enough to cover an entire island in lava …
The median house price on the island of Hawaii is around $650,000 and has risen about 25% over the last decade. Whatever the income level of the neighborhood, the losses will be pricey.
I haven’t looked closely, but I think rebuilding after a volcano is probably substantially more difficult than a flood. That would tend to result in losses being one-time events instead of the happening every decade or two as is the case with river floods.