Hurricane Fears Boost Florida Insurance Rates
Residents of Florida were fortunate Tropical Storm Ernesto died down before it hit their state. The most obvious reason, of course, being safety for themselves and their loved ones.
Jim Pozo is a Florida mortgage broker, however, and he pointed to another break owners received when everyone’s worst hurricane fears were NOT realized: a storm causing even modest damage would push up his already high insurance premiums.
“I don’t know how people can afford it at these rates,” said Pozo. Another big storm, he said, “is just going to make it go up more.”
Nowhere is the hurricane-relayed insurance situation more severe than in Florida, particularly towns across South Florida housing market and in the Florida Panhandle, where storms in recent years have added billions to the insurers’ losses.
“Even though this was a very mild tropical storm, it reminds the insurance industry of the risk involved in underwriting insurance in Florida and will make them even more cautious,” said J. Antonio Villamil, chairman of Florida Governor Jeb Bush’s council of economic advisers and chief executive of Washington Economics Group, a consulting firm based in Coral Gables, Florida.
Confusion regarding statewide insurance premiums
State officials are stymied on what to do about the problem. They can hope, like Pozo, that the next three months of this hurricane season will be as benign as the first three. The officials have been struggling to halt rising insurance premiums, but they know the more pressure they put on company profits, the more the companies will reduce the amount of coverage they offer.
Insurers such as State Farm and Allstate have already cut back significantly. Consequently, the state-run insurance agency - Citizens Property Insurance - has become the biggest insurer in the state, with about one million policies. Bush and other officials are considering whether to call a special session of the state Legislature to wrestle with insurance issues. Otherwise, demand for Florida home loans could sink even lower.
Insurance prices have been climbing in Florida since Hurricane Andrew in 1992 cost the insurers $21.5 billion in today’s dollars. That storm stood for years as the most costly hurricane … until Hurricane Katrina a year ago led to more than $41 billion in insurance payouts.
Finding coverage at any cost is becoming increasingly difficult. Allstate, for example, has begun turning down renewals for more than 200,000 customers in Florida and turning them over to smaller companies.
Along the beaches and near the water, coverage costs have doubled this year for many homes. They’re now the most expensive in the country, industry officials say. It’s an issue that adds to other housing difficulties across cities in the state. Until something is done about them, people will be hesitant to use a Florida home mortgage on a first house.
