The Zebra Newsroom

Hurricane-prone states are still recovering from 2020’s record-breaking storms, continue to seek support from insurance carriers as 2021’s hurricane season approaches

hero image

In 2020, global economic losses from natural catastrophes totaled $190 billion, with insured losses reaching $89 billion, according to the  Swiss Re Institute. The U.S. accounts for $119 billion, a  59% increase from the prior year. Notably, the North Atlantic hurricane season left people in high-risk states like Florida and Louisiana underinsured, and insurers didn’t have the resources to deal with the repercussions. Consequently, both states have been discussing senate bills to address the high volume of property insurance claims coming in.

Florida

The state of Florida has been struggling to determine what an adequate amount of property insurance is for policyholders and has been a hotbed for litigation. Florida Insurance Commissioner David Altmaier recently pointed out that Florida accounts for  76.45% of all homeowners’ lawsuits opened against insurance companies in the U.S. in 2019, even though the state only accounted for 8.16% of all homeowners insurance claims filed that year. In 2020, eight counties in  Alabama,  Florida  and  Louisiana  accounted for half of the federal flood insurance claims payments  which rose from a series of storms that caused major damage during the record-breaking Atlantic hurricane season. 

Existing insurers have been taking a step back and reducing their exposure in areas where there is high litigation rate or high reinsurance costs. Four companies have closed for new business, 12 created strict underwriting restrictions and others are offsetting their losses with rate increases. In response, insurer of last resort Citizens Insurance stepped in to provide  Floridians with thousands of new policies per week and is expecting to reach a policy count of 700,000 by the end of the year. Since, Citizens has been seeking approval by the Office of Insurance Regulation (OIR) to charge new policyholders actuarially sound rates instead of allowing them to join the insurer with capped premiums that existing policyholders receive, as  the carrier was growing too fast and its overall financial situation was “unsustainable.”The recommendation would increase rates for new business by an average of 21%. 

On April 30 2021, the  Florida Senate passed a bill that addressed litigation cost drivers in the property insurance market, as current homeowners have been paying more for their policies while simultaneously suffering massive losses. This bill  tackles roofing claims abuse and addresses excessive litigation facing insurers  by requiring detailed notice of property insurance claims prior to litigation and changes how attorney fees are awarded. The OIR also denied Citizens’ request  stating that all policies are subject to price caps set by the state law

In May, Florida Insurance Commissioner David Altmaier signed consent for three insurers to  drop more than 50,000 homeowners policies as an extraordinary remedy to stay solvent in the state. Universal Insurance Co. of North America is dropping 13,294 personal policies, Gulfstream Property & Casualty is cancelling 20,311 personal residential policies, and Southern Fidelity Insurance Co, was approved to nonrenew approximately 19,600 residential policies within the next 14 months. 

Read about other insurance-related bills about how the state plans to manage high risk situations that have been under discussion  here

Louisiana

Many insurance carriers opted to exit Louisiana when Hurricane Katrina hit in 2005, but companies have slowly started to come back. Farmers, for example, started to pull out in 2005 after Hurricane Katrina and exited the state completely by 2014. In March, Farmers reported that it would be returning to the state’s personal lines market after a seven-year absence and plans to provide coverage in all 64 parishes. CSAA-backed homeowners insurtech Kin Insurance also  announced that it would start signing policies  in Louisiana to offer a seamless way for homeowners to protect their property. 

In April 2021, the Louisiana Department of Insurance reported that it was still seeing claims costs rise from the  three hurricanes that struck in 2020, with companies now expected to pay $9.6 billion on claims of all types (up from $7.7 billion at the end of 2020). The storm season from 2020 was the second most expensive for the state since 2005. Policyholders have now filed 311,266 claims of all types from Hurricane Laura, Delta and Zeta through the first quarter of 2021, with  Laura in particular being so severe that it crossed the threshold of FEMA’s normal public assistance cost-share rate of 75%. Louisiana stated that it took the Department of Transportation and Development eight months to clear its roadways from Hurricane Laura, wrapping up close to  1.4 million cubic yards of debris  from just that single storm. 

LDI also stated that it would expand flood insurance for consumers beyond the National Flood Insurance Program, making it even easier for private carriers to write flood insurance in the state. LDI is also backing  Senate Bill 29, which would enable the insurance commissioner to react more quickly to emergency situations and safeguard the rights of policyholders during emergencies. Governor John Bel Edwards and Senator Jeff Merkley also stated in early May that  they asked the White House for billions in disaster recovery aidto help with what FEMA couldn’t cover.  AM Best stated that P/C insurers should continue to increase their commercial rates to more adequately reflect claims costs  and loss costs to help improve underwriting profitability, especially since climate-related perils are likely to continue. 

 

After a record of 30 named storms in 2020, Colorado State University predicts that there will be at least  17 named storms in 2021, with eight expected to reach hurricane strength and four with winds of 111 miles per hour. RMS, the world’s leading catastrophe risk modeling and solutions company, announced a handful of new models in May 2021, including updates to the  North Atlantic Hurricane Models such as a new alternative view of risk accounting for the Florida Residential Lines.Hopefully, with these new advances and more visibility to the damages caused by 2020’s storms, high-risk states will be better prepared for this year’s hurricane season. 

Don't forget to share!
The Zebra

The Zebra is the nation's leading independent insurance comparison site. The Zebra compares more than 100 insurance companies and provides agent support and educational resources to ensure drivers are equipped to make the most informed decisions about their home and auto insurance.