Media Briefing: Florida Property Insurance Markets: End of 2007 Hurricane Update
This online media briefing by Dr. Robert Hartwig, an economist and president of the Insurance Information Institute, focuses on the Florida property insurance market and the impacts of the 2007 hurricane season. It notes that while Florida and other Gulf and Atlantic Coast states enjoyed a welcome respite from catastrophic storms in 2006 and 2007, the two previous years were the worst years ever for insured hurricane losses.
Since 1992, the year of Hurricane Andrew, private home insurers in Florida have experienced underwriting losses estimated at $6.2 billion. Hartwig predicts that there will eventually be a $100-billion catastrophe year and that Florida, as the most catastrophe-prone state in the U.S., will likely be involved. The presentation includes an insured catastrophe loss review at the global, national and Florida levels. Data showing the frequency and cost of past storms are reviewed with increases in population and coastal development cited as key reasons behind escalating losses. Statistics indicating that many Floridians are allowing the flood policies to lapse are included.
The presentation concludes with the following key messages on profitability: all of the profits earned in 2004 and 2005 and most of the profits in 2006 and 2007 were earned in states and from types of insurance unaffected by the hurricanes; 2006 and 2007’s respite in hurricane activity provides insurers and reinsurers with the ability to rebuild their claims paying resources; and by law, the rates charged for insurance are based exclusively on past and expected losses in that state. Profits in other states or from other types of insurance cannot be used to subsidize losses in the Florida homeowners insurance market.