While the size of the residual property market in hurricane-exposed states in 2012 declined from the peak in exposure value and policy counts seen in 2011, the market overall remains at near-record levels, the Insurance Information Institute (I.I.I.) says.
In an updated report Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice, the I.I.I. notes that exposure to loss in the residual property market totaled $818.1 billion in 2012 with total policies in-force of 3.23 million.
This compares with total exposure to loss of $884.7 billion and total policies in-force of 3.3 million in 2011.
The I.I.I. notes that today, overall exposures in the residual property market appear to have stabilized somewhat and many of the plans are underwriting profitably.
Legislative reform passed in some of the most at-risk markets, for example the state of Florida, has contributed to an improvement in the overall financial position of the plans, it says.
Diminished hurricane activity in recent years in areas like Florida has been another positive factor.
The I.I.I. warns:
But, while hurricane activity in the most exposed states may have been lower in recent years, there is no question that over the long-term major hurricanes will cause extensive damage in future. This highlights how important it is for the rates charged by these plans to be actuarially sound.Ã¢â‚¬
Despite attempts by certain states to reduce the size of their plans, the fact of the matter is that this market of last resort remains the market of first choice for many vulnerable, high-risk coastal properties, the I.I.I. says.