IN­SUR­ANCE SYS­TEM BLOWN AWAY,

Es­ti­mate $6B in claims

Boston Herald - - NEWS -

FORT LAUD­ERDALE, Fla. — Florida’s dis­jointed prop­erty in­sur­ance sys­tem that re­lies al­most ex­clu­sively on small and mid­size com­pa­nies will take a multi­bil­lion­dol­lar 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 such as 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 hard­est-hit 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 re-in­sur­ance 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, many prop­erty own­ers could only get poli­cies from Cit­i­zens Prop­erty and its pre­de­ces­sor, peak­ing at about 1.5 mil­lion poli­cies in 2012.

AP Pho­tos

UT­TER DE­STRUC­TION: Mex­ico Beach was nearly oblit­er­ated by the hur­ri­cane. Right, Joshua and Jack Keri­gan re­trieve be­long­ings from their wrecked house.

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