Insurance – Different in FL and TX

The insurance issues in FL are quite different from those in TX. See this article from the NYTimes: Irma May Force Florida Insurers to Turn to Deeper Pockets  

When the storm is over and the streets are safe again, Floridians will be checking what has become of their homes. They may also want to check on their insurers.
The big national carriers like State Farm and Allstate pulled out of Florida’s homeowners’ market years ago, citing catastrophic risks and unhelpful state regulators. Those departures left a vacuum that the state filled, initially, with a state-owned insurer, Citizens Property Insurance. Eventually, the state offered incentives to coax some brave new insurers into the market.

As a result, all that may seem to stand between Florida’s homeowners and potential ruin is one state-owned insurer and dozens of relatively little-known companies that do all or most of their business in the state. They all have the benefit of the Florida Hurricane Catastrophe Fund, which, with no major storms in the past 12 years, has $17 billion at the ready — a sum that may not be nearly enough.

New Report on Resilience from the White House

From the White House Office of Management and Budget a new report titled  Standards and Finance to Support Community Resilience.  This 29 page report is  the culmination of collaboration with leaders in re/insurance, catastrophe modeling, and building science to advance community resilience and insurability.  The office also announced additional commitments by leaders in the insurance industry to help identify and reduce the risks and costs of disasters.


Should There Be Global Disaster Insurance?

See this article in the NYT by Jeffrey Sacks: Insuring for Disasters.  Some excerpts:

Insurance would reveal how vulnerable certain parts of the world are to rising costs of disasters, including those associated with global warming. But at least we’d be able to begin to account for this. It would provide a powerful way to drive mitigation and adaptation investments, a point emphasized in recent years by Rowan Douglas of the insurer Willis Group.

A global system of disaster insurance would of course not be perfect and would take time to implement, but could save many lives and livelihoods in the years ahead, and help vulnerable low-income countries like Haiti and Nepal chart a path to sustainable development.

Lots of Activity re Pending Rise in Flood Ins. Rates

#1 – See this Wash Post article: Rise in government insurance rates to mirror rising waters, flood debt. Some excerpts from the article:

The government is slowly phasing out subsidized flood insurance for more than a million Americans with houses in flood zones who, in some cases, pay half the true commercial rate.

Some owners say they are angry because their houses near lakes, rivers, bays and oceans were much more affordable with cheap rates that will now increase by as much as 25 percent each year until the premiums equal the full risk of settling down on property mapped as a flood zone.

#2 – Check out the new report on flood insurance from the National Academy of Sciences:

The new report: Affordability of National Flood Insurance Program Premiums: Report 1 (2015)


Abstract of the report:

The National Flood Insurance Program (NFIP) within the Federal Emergency Management Agency faces dual challenges of maintaining affordable flood insurance premiums for property owners and ensuring that revenues from premiums and fees cover claims and program expenses over time. A new congressionally mandated report from the National Research Council, the operating arm of the National Academy of Sciences, found that these objectives are not always compatible and may, at times, conflict with one another. The report discusses measures that could make insurance more affordable for all policy holders and provides a framework for policymakers to use in designing targeted assistance programs.

Although there are multiple ways to measure the cost burden of flood insurance on property owners and renters, the report found that there are no objective definitions of affordability. Where Congress or FEMA determine insurance premiums to be unaffordable, households paying those premiums might be made eligible for assistance through the NFIP. The report says that it will be up to policymakers to select which households will receive assistance, the form and amount of assistance provided, how it will be provided, who will pay for the assistance, and how an assistance program will be administered.




Insurance for Weather-Related Disasters

Article in the NY times titled a Retreat from Weather Related Disasters is mainly about obtaining insurance for weather-related disasters.

Direct link to the Ceres report titled Insurer Climate Risk Disclosure Survey Report & Scorecard: 2014 Findings & Recommendations

UPDATE: Additional info in an article from the Canadian Globe and Mail paper; see: Study finds insurers lack ‘preparedness’ in climate cases .The effects of climate change could lead to stormy conditions for global insurers – and most aren’t ready for that forecast, research shows.

Insurance companies operating in the United States show a “profound lack of preparedness in addressing climate-related risks and opportunities,” according to not-for-profit sustainability advocacy group Ceres’s Insurer Climate Risk Disclosure Survey.

A study of 330 companies, representing 87 per cent of insurance premiums issued in the U.S., awarded top ratings to just nine firms – almost all of which of are large, global insurers and reinsurers, such as Munich Re, Swiss Re and Allianz.

Excellent New Article – in Environment Magazine

Since Michelin ranks restaurants with stars, the Diva has decided to award stars to documents re recovery. Here is the first one I would give 4 stars to:

Making America More Resilience toward Natural Disasters: A Call For Action, by Howard Kunreuther, Erwann Michel-Kerjan and Mark Pauly. From Environment Magazine, July/August 2013.  The title does not really do justice to the wide array of useful content here, so I suggest you download the full article and decide for yourself how you would categorize it.

Some excerpts:

Hurricane Sandy caused an estimated $65 billion in economic losses to residences, business owners, and infrastructure owners. It is the second most costly natural disaster in recent years in the United States, after Hurricane Katrina in 2005, but it is not an outlier; economic and insured losses from devastating natural catastrophes in the United States and worldwide are climbing.

According to Munich Re,2 real-dollar economic losses from natural catastrophes alone have increased from $528 billion (1981–1990), to $1,197 billion (1991–2000), to $1,23 billion (2001–2010). During the past 10 years, the losses were principally due to hurricanes and resulting storm surge occurring in 2004, 2005, and 2008. Figure 1 depicts the evolution of the direct economic losses and the insured portion from great natural disasters over the period 1980–2012.2

There is a wealth of useful information in this article, which makes it hard to summarize. It is thoughtful and clearly writtten. I consider this an essential document, one that I think will be a classic in time.

Insurance – issues for the Moore recovery

The Wall Street Journal had an article and a video clip this past week about how the insurance companies that cover hurricane and tornado damage are finding ways not to pay out as much or as often as had been true in the past.  Since I do not subscribe to the WSJ, I cannot provide any additional details.  The net result is more personal hardship for property owners in Moore, however.

Here is some additional information about insurance from CNBC, and this article is not kind to the U.S. insurance industry.  See:  Why Insurers May Be Unprepared for the Next Big Storm. Some excerpts follow:

Hurricanes, droughts, tornadoes, wildfires … extreme weather is threatening to take bigger chunks out of insurance companies and yet the industry, in the eyes of experts and consumer advocates, isn’t making any preparations … other than raising rates.

“I can’t think of another industry that’s more directly affected by the weather changes,” said Professor Anant Sundaram of Dartmouth’s Tuck School of Business. “They need to get out in front of this. It comes down to more than just raising premiums on customers. It’s being pro-active and thinking ahead.”

Eleven extreme weather events each caused at least a billion dollars in losses last year in the United States. Loss estimates for Hurricane Sandy alone are at $50 billion, of which insurance company damage payouts are said to be close to $20 billion.

 Insurers acknowledge that extreme weather or climate change has become the new normal. But a new survey says that many firms are not prepared for future super storms that could affect their industry, while homeowners and businesses suffer raising premium rates.

According to an industry wide report from Ceres, a non-profit group that works toward better business practices, only 23 of 184 U.S. insurance companies have comprehensive climate change strategies that could help mitigate the damaging costs from extreme weather to the industry and consumers. (Read More: World’s Best Places to Live)

“Insurers are starting to think about climate change from their losses but I’m not sure they realize how much of a financial threat it is to them,” said Peyton Fleming, a spokesman for Ceres.