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An­a­lysts: Florida in­sur­ers will sur­vive Michael.

The Citizens' Voice - - FRONT PAGE - BY TERRY SPENCER

FORT LAUD­ERDALE, Fla. — Florida’s dis­jointed prop­erty in­sur­ance sys­tem that re­lies al­most ex­clu­sively on small and mid­size com­pa­nies will take a multi­bil­lion dol­lar loss from Hur­ri­cane Michael, but has suf­fi­cient re­serves and back­ups that providers should be able to pay claims with­out prob­lems, an­a­lysts say.

Ma­jor na­tional play­ers like State Farm, All­state and Lib­erty Mu­tual write few if any home­own­ers poli­cies in Florida be­cause of the high risk of hur­ri­cane losses, leav­ing the mar­ket to smaller com­pa­nies and the state-cre­ated in­surer of last re­sort, Ci­ti­zens Prop­erty.

Bos­ton-based Karen Clark & Com­pany, which mod­els catas­tro­phes, es­ti­mates Florida pri­vate in­sur­ers will pay $6 bil­lion in claims for wind and storm surge dam­age to res­i­den­tial, com­mer­cial and in­dus­trial prop­er­ties and ve­hi­cles. The es­ti­mate doesn’t in­clude losses cov­ered by the Na­tional Flood In­sur­ance Pro­gram, which has about 60,000 poli­cies in the hard­esthit Florida coun­ties. The pro­gram had no im­me­di­ate es­ti­mate on its losses.

An­a­lysts say that, de­spite their smaller size, Florida in­sur­ers should be able to cover their Michael losses through re-in­sur­ance — poli­cies in­sur­ance com­pa­nies pur­chase from global com­pa­nies like Lloyd’s of Lon­don to cover cat­a­strophic losses. Most of the state’s dam­age from Wed­nes­day’s Cat­e­gory 4 storm is in the sparsely pop­u­lated Pan­han­dle, less­en­ing the fi­nan­cial blow.

Florida in­sur­ers “are built to be able to with­stand these types of storms that are ex­pected to hap­pen ev­ery 10 to 15 years,” ac­cord­ing to Brian C. Sch­nei­der, a se­nior direc­tor at the an­a­lyt­ics firm Fitch Rat­ings. The com­pany said the rein­sur­ance pro­grams per­formed well af­ter Hur­ri­cane Irma last year, which caused about $50 bil­lion in dam­ages in Florida.

But, Sch­nei­der said, the in­dus­try be­lieves many Florida in­sur­ers would not sur­vive if a ma­jor storm made a di­rect hit on Mi­ami, Tampa or an­other ma­jor city. The rein­sur­ance com­pany Swiss Re es­ti­mated last year that a Cat­e­gory 5 storm hit­ting Mi­ami could po­ten­tially cost the in­dus­try al­most $200 bil­lion. The state has about $17 bil­lion in a fund to help pri­vate com­pa­nies pay hur­ri­cane claims if they run into trou­ble.

Ma­jor in­sur­ance com­pa­nies fled Florida’s home­own­ers mar­ket af­ter 1992’s Cat­e­gory 5 Hur­ri­cane An­drew hit south of Mi­ami, de­stroy­ing much of the city of Homestead and caus­ing $45 bil­lion in dam­ages, ad­justed for in­fla­tion. Af­ter the com­pa­nies fled, many prop­erty own­ers could only get poli­cies from Ci­ti­zens Prop­erty and its pre­de­ces­sor, peak­ing at about 1.5 mil­lion poli­cies in 2012.

The state, want­ing to re­duce its ex­po­sure, for most of the last 20 years has been en­tic­ing smaller, niche com­pa­nies into the mar­ket but re­quired them to ob­tain rein­sur­ance. The in­dus­try was also helped by a 12-year gap be­tween hur­ri­canes hit­ting the state from 2005 to last year. Their rev­enue is helped as Florida has the most ex­pen­sive home­own­ers in­sur­ance in the na­tion, ac­cord­ing to the In­sur­ance In­for­ma­tion In­sti­tute, with home­own­ers pay­ing an av­er­age an­nual cost of just un­der $2,000 in 2015, the lat­est year avail­able.

The push worked as Ci­ti­zens’ foot­print has shrunk by 72 per­cent, but re­mains the state’s sec­ond-largest prop­erty in­surer with about 420,000 poli­cies — most of them in South Florida, far from Michael’s dam­age zone. Spokesman Michael Peltier said the com­pany es­ti­mates it will re­ceive about 12,000 claims from Michael, but hasn’t cal­cu­lated an ex­pected loss yet. Be­cause its poli­cies are in the high­est-risk ar­eas of the state, its av­er­age pol­icy costs nearly $2,600 an­nu­ally with a range from about $3,600 in Mi­ami and the Florida Keys to about $1,700 in Tay­lor County, not far from where Michael hit.

The state’s largest prop­erty in­surer, Uni­ver­sal Prop­erty & Ca­su­alty Co., writes al­most 600,000 poli­cies. It did not re­turn calls seek­ing com­ment.

GER­ALD HER­BERT / AS­SO­CI­ATED PRESS

Mary Frances Par­rish ex­am­ines her top­pled pe­can tree, which fell in a neigh­bor’s house, in the af­ter­math of Hur­ri­cane Michael in Panama City, Fla., on Sat­ur­day.

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