Hurricane subprime

Insurance companies, already hammered by the credit crunch, wince as Gustav approaches the Gulf

Published August 29, 2008 3:10PM (EDT)

Add another constituency to Gulf Coast residents and convention-attending Republicans to those worried by Hurricane Gustav's approach: Insurance companies already battered by the ongoing financial crisis.

The Wall Street Journal reports:

Gustav's timing couldn't be worse for an industry whose investment portfolios -- into which insurers sink premiums, and then liquidate to pay claims -- have sprung leaks.

In the most notable example, American International Group Inc. reported a loss of $12.2 billion in the first six months of the year, mostly from failing subprime-mortgage-related investments. The remaining property-and-casualty insurers reported a combined $5.4 billion in investment losses during the same period, according to a report from Fitch Ratings.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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