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What Hurricane Ian could mean to Florida’s struggling property insurance industry

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TALLAHASEE — Even before Hurricane Ian made landfall, headlines rang out that the storm would wreak havoc on the woes of Florida’s homeowners insurance market.

Just this year, six property and casualty insurers became insolvent, contains one declared insolvent On the same day, Ian formed as a tropical storm. State insurance regulators are keeping a close eye on dozens of other companies participating in Fritz, and homeowner premiums are rising to the highest in the nation.

“This is a test for the insurance industry as a whole,” said Michael Carlson, president of the Florida Individual Insurance Federation. See Hurricane Ian. The Commonwealth represents State Farm, Allstate, Farmers, and Progressive. “This looks like a catastrophe.”

A 500-mile-wide Category 4 storm isn’t good for anyone, but it doesn’t necessarily mean disaster for Florida insurers. The insurance market is complex, with changing responsibilities and protections for paying catastrophe claims.

nevertheless If the storm isn’t a disaster for insurance companies, it’s likely to be a disaster for the tens of thousands of Floridians whose homes have been flooded by rain and storm surges.

Here’s what insurers and analysts will be watching in the coming weeks and months.

Flooding and wind damage are key — can be terrible for homeowners

Typical homeowners insurance covers wind and fire damage, but not floods.

Some analysts believe most of the damage from Hurricane Ian was due to flooding.

This would place most of the financial burden on the National Flood Insurance Program, which provides the majority of residential flood insurance, rather than Florida insurance companies.

Also, if the homeowner does not have flood insurance, the burden may fall on the homeowner. (More on that later.)

This does not mean that hundreds of thousands of wind-related insurance claims are unlikely to occur. Also, because insurance companies may contest liability for some of these damages, homeowners are more likely to sue their insurance company, which can be a headache for homeowners and costly due to legal fees. Increased costs for insurance companies. This is a scenario that frequently occurred after Hurricane Michael in 2018.

Already, one group is estimating insured losses of $25 billion to $40 billion, although some observers say it’s too early to say. Experts say an initial assessment of the damage would require adjusters from insurance companies and the Federal Emergency Management Agency.

Kyle Ulrich, president and CEO of the Florida Association of Insurance Agents, said:

Insurance companies have their own policies to pay for hurricane claims

Insurance companies also have protective measures to pay claims.

Insurance companies are supposed to prepare for the hurricane season by purchasing reinsurance.

In the event of a hurricane, your insurance company will have to pay the deductible, but these reinsurers may cover the costs of the claim.

The Florida Department of Insurance Regulation applies a “stress test” prior to each year’s storm season to ensure insurers have adequate coverage. Insurers need to model past storm scenarios, or series of storm scenarios. Determine whether reinsurance is appropriate for modeled losses.

Last year, 67 insurers I had to model three scenarios, one of which was Hurricane Andrew in 1992. He failed only two companies. One was liquidated and the other added enough capital to withstand the scenario.

This year’s insurance company tests included the 1928 Lake Okeechobee Hurricane, which killed about 2,500 people. However, the Insurance Regulatory Authority has not disclosed how the company fared in the test.

The insurance company also provides a safety net from the Florida Hurricane Disaster Fund. Businesses have to pay for it, and when a hurricane like Ian hits, the fund helps pay the claims.

Called the “Cat” fund, it went bankrupt in 2006, but has about $15 billion available.

Homeowners Without Flood Insurance Can Be A Big Burden

In Charlotte and Lee counties, where Ian is believed to have been hit hardest, data shows that only about 30 percent of homes have flood insurance through the National Flood Insurance Program.

It would be of some help to homeowners without flood insurance, but probably not enough to make them perfect.

FEMA Disaster Declaration Approved by President Joe Mr. Biden, qualified applicants apply Individual/Household Program If you live in 13 counties: Charlotte, Collier, DeSoto, Hardy, Hillsboro, Lee, Manatee, Orange, Osceola, Pinellas, Polk, Sarasota, Seminole. More may be added.

The program allows residents to apply for federal assistance to repair their homes and cars if they don’t have flood or auto insurance or don’t have enough insurance.

However, assistance for home repairs is limited to less than $40,000. According to the New York TimesCongress can give the U.S. Department of Housing and Urban Development additional funding to set up what are called disaster recovery grants that states pay homeowners, but not until that money reaches homeowners. could take years, The Times reported.

Small and Medium Enterprise Agency Offer low interest loans We lend to post-disaster homeowners, businesses, and nonprofits, but loans must be repaid. As the Times points outwhich could be equivalent to another house mortgage.

what about citizen?

As insurance companies went bankrupt, much of their insurance ended up in Citizens Property Insurance, Florida’s national insurer for those unable to find coverage in the private market. (Not covered by flood insurance.)

Many are worried about Citizens policy volume, which has increased from 420,000 in October 2019 to just over 1 million. (Peak he had about 1.5 million in 2011.) Florida taxpayers would be in trouble if a disaster struck and citizens couldn’t afford insurance.

However, the company continues to be profitable. With $6.8 billion in surplus (plus he has $6.5 billion in other accounts to pay bills), the storm appears to have hit parts of the state where Citizens doesn’t have significant exposure.

The company estimates that 225,000 claims could result from Hurricane Ian, costing the company between $1.9 billion and $3.7 billion.

“They think they can get through this,” Gov. Ron DeSantis said, referring to citizens this week.

Full range may not be known for years

Homeowners have two years to file a claim after the storm, so it may take time for Ian’s impact on insurance companies to be understood.

In the meantime, homeowner interest rates may continue to rise, but there is not necessarily a correlation between rising interest rates and storms. In Florida, infection rates increased after a series of storms in 2004 and 2005. They have pushed up the cost of reinsurance. legislators and the government of the time. Charlie Christ responded by making it easier for businesses to access the Hurricane Disaster Fund.

Until Ian, Florida hadn’t been hit by a hurricane since Hurricane Michael in 2018, but rates have risen sharply. In 2019, the Floridians paid when DeSantis was sworn in average premium $1,988. This year it’s currently at $4,231, three times his national average.

In response, state legislators have made minor changes to state insurance laws over the last few years. Most of it is focused on curbing lawsuits and allowing businesses to take advantage of new state-created reinsurance funds.

Experts will be waiting to see if the changes make any difference after Ian.

Jeff Waters, meteorologist and senior product manager at risk management firm RMS, said:

Herald staff writers Ana Claudia Chacin and Ben Wieder contributed to this report.

• • •

Tampa Bay Times Coverage of Hurricane Ian

How to help: A place to donate or volunteer to help victims of Hurricane Ian.

Tampa Bay closures: What you need to know about bridges and roads in Ian’s aftermath

When the storm has passed: So? Safety tips for returning home.

Post-Storm Questions: After Hurricane Ian how to get help Fallen trees, food and shelter damage.

Weather effects: Hurricane Ian was supposed to hit Tampa Bay head-on. what happened?

What to do if a hurricane damages your home: Calm down and call your insurance company.

school: Will schools reopen soon after Hurricane Ian passes? It depends.

MORE STORM COVERAGE: Be prepared and stay up to date. tampabay.com/hurricane.

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