Hur­ri­cane Irma’s costs are still ris­ing, and so could your in­sur­ance rates

Miami Herald - - WEATHER -

June and Novem­ber 2018 de­spite the num­ber of claims in­creas­ing by just 2.5 per­cent, the most re­cent tal­lies by the Florida Of­fice of In­sur­ance Reg­u­la­tion show.

For ex­am­ple, Sun­rise­based FedNat Hold­ing Co., in ad­di­tion to an­nounc­ing a net loss of $23 mil­lion driven by Hur­ri­cane Michael in the fourth quar­ter of 2018, also said Thurs­day it in­creased its Hur­ri­cane Irma loss es­ti­mate from $634 mil­lion to $695 mil­lion.

The in­creased losses, com­bined with the on­go­ing cri­sis stem­ming from ex­ces­sive claims and lit­i­ga­tion over non-weather-re­lated wa­ter losses in Florida, will force in­sur­ers to raise rates so they can build up ad­e­quate re­serves in prepa­ra­tion for this year’s hur­ri­cane sea­son, the re­lease said.

“Th­ese late-break­ing losses are col­lec­tively known in the trade as ‘loss creep,’” COIN Re CEO E.W. “Ted” Blanch was quoted in the re­lease as say­ing. “The fac­tors con­tribut­ing to it are not only af­fect­ing in­sur­ers and rein­sur­ers; they are tak­ing money out of the pock­ets of Florida home­own­ers.”

The in­creased hur­ri­cane costs re­sult partly from ex­penses of pro­cess­ing claims, in­clud­ing hir­ing pri­vate in­ves­ti­ga­tors to ver­ify that home­own­ers told the truth when re­port­ing, as an ex­am­ple, that their front porch was swept away in a storm, the re­lease said.

South Florida-based Hur­ri­cane Irma claims are tak­ing longer to re­solve than claims in the rest of the state, the Of­fice of In­sur­ance Reg­u­la­tion’s data shows. About a quar­ter of all claims are from Broward, Palm Beach and Mi­amiDade coun­ties. Of them, 14.7 per­cent re­main open. Just 5.2 per­cent re­main open in the rest of the state.

Loss ad­just­ment costs also in­clude at­tor­neys fees in­curred when dis­putes over claims end up in the courts.

Lit­i­ga­tion has in­creased sig­nif­i­cantly in re­cent years over dis­putes in­volv­ing re­pair con­trac­tors work­ing un­der a third-party claims as­sign­ment, or as­sign­ment of ben­e­fits, the re­port said.

When losses from par­tic­u­lar events reach a pre­de­ter­mined thresh­old — com­pa­ra­ble to a de­ductible for in­di­vid­ual pol­i­cy­hold­ers — in­sur­ers re­cover any ad­di­tional losses from their rein­sur­ers.

In­sur­ers’ cost for reinsurance — which is in­sur­ance that car­ri­ers buy to avoid be­ing bankrupted by claims from any sin­gle year of losses — did not sig­nif­i­cantly in­crease on av­er­age for cov­er­age pur­chased at the begin­ning of 2019, the trade web­site Reinsurance News re­ported.

That’s be­cause the sup­ply of in­vest­ment cap­i­tal will­ing to fund reinsurance con­tin­ues to ex­ceed de­mand, keep­ing the cost of that cap­i­tal low, in­sur­ance rat­ings firm De­motech said in a Feb. 27 state­ment.

While Reinsurance News

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.