Through these nonprofits, IICF will provide funds for recovery support, temporary shelter and basic necessities, along with non-perishable food, toiletry items and diapers for children impacted by the storm.
“The insurance industry is rooted in helping others at their time of need,” said Bill Ross, CEO of IICF. “As tens of thousands of Floridians struggle to recover from the devastation of Hurricane Ian, we as an industry are moved to support those impacted through charitable giving.”
Litigation costs could add between $10 billion and $20 billion to insured losses from Hurricane Ian, adding to the woes of Florida’s already struggling homeowners’ insurance market, says Mark Friedlander Triple-I’s corporate communications director.
Early estimates put Ian’s insured losses above $50 billion.
“Based on the past history of lawsuits following Florida hurricanes and the state’s very litigious environment, we expect a large volume of lawsuits to be filed in the wake of Hurricane Ian,” Friedlander said in an interview with Insurance BusinessAmerica.
Most suits are expected to involve the distinction between flood and windstorm losses. Standard homeowners’ policies exclude flood-related damage from coverage, but differentiating between wind and flood damage in the aftermath of a major hurricane can be challenging.
Flood insurance is available from FEMA’s National Flood Insurance Program, as well as from a growing number of private carriers.
Trial attorneys are “already on the ground” and soliciting business in some of the hardest hit areas, Friedlander said. “This will be a key element in the solvency of struggling regional insurers who are already facing financial challenges.”
Six Florida-based insurers have already failed this year. Florida accounts for 79 percent of all U.S. homeowners’ claims litigation despite representing only 9 percent of insurance claims, according to figures shared by the Florida governor’s office. Litigation has contributed to double-digit premium-rate increases for home insurance in recent years, with Florida’s average annual home-insurance premium of $4,231 being among the nation’s highest.
“Floridians are seeing homeowners’ insurance become costlier and scarcer because for years the state has been the home of too much litigation and too many fraudulent roof-replacement schemes,” Triple-I CEO Sean Kevelighan said. “These two factors contributed enormously to the net underwriting losses Florida’s homeowners’ insurers cumulatively incurred between 2017 and 2021.”
Trevor Burgess, CEO of Neptune Flood Insurance, a St. Petersburg, Fla.-based private flood insurer, said that in all locations pummeled by Ian, the percentage of homes covered by flood policies is down from five years ago. Friedlander told Fox Weather that, while more than 50 percent of properties along Florida’s western Gulf Coast are insured for flood, “inland…the take-up rates for flood insurance are below five percent.”
While Florida is at particularly severe and persistent risk of hurricane-related flooding, the protection gap is by no means unique to the Sunshine State. Inland flooding due to hurricanes is causing increased damage and losses nationwide – often in areas where homeowners tend not to buy flood insurance.
In the days after Hurricane Ida made landfall in August 2021, massive amounts of rain fell in inland, flooding subway lines and streets in New York and New Jersey. More than 40 people were killed in those states and Pennsylvania as basement apartments suddenly filled with water. In the hardest-hit areas, flood insurance take-up rates were under five percent.
Damaging floods that hit Eastern Kentucky in late July 2022 and led to the deaths of 38 people also were largely uninsured against. A mere 1 percent of properties in the counties most affected by the flooding have federal flood insurance.
“We’ve seen some pretty significant changes in the impact of flooding from hurricanes, very far inland,” Keith Wolfe, Swiss Re’s president for U.S. property and casualty, said in a recent Triple-I Executive Exchange. “Hurricanes have just behaved very differently in the past five years, once they come on shore, from what we’ve seen in the past 20.”
Severe hurricane damage in recent years has led to major losses by writers of Louisiana homeowners’ insurance and to the insolvency of eight insurers.
Louisiana homeowners’ insurers had a combined ratio of 461.9 in 2021. Combined ratio represents the difference between claims and expenses paid and premiums collected by insurers. A combined ratio below 100 represents an underwriting profit, and a ratio above 100 represents a loss.
With earned premium of nearly $2 billion, the 461.9 combined ratio means the industry experienced a $7.2 billion underwriting loss in 2021. As Triple-I Chief Insurance Officer Dale Porfilio puts it, “It would take 24 years of achieving a combined ratio of 85 for homeowners’ insurance writers in Louisiana to return to positive profitability.”
In 2020, Hurricanes Delta, Laura, and Zeta all caused major damage, resulting in a large number of insurance claims. Through September 30, 2021, there were 323,727 insurance claims of all types for these storms. Insurers paid or reserved $9.1 billion for Laura alone. Additionally, Hurricane Ida, which occurred in 2021, generated 460,709 insurance claims of all types through June 30, 2022, with insurers having paid or reserved $13.1 billion for that storm.
Eight Louisiana homeowner insurers already have become insolvent, and at least 12 companies have submitted withdrawal notices to Louisiana’s Department of Insurance, a preliminary measure needed to leave the state. This has forced tens of thousands of homeowners to depend on the state’s insurer of last resort, Louisiana Citizens Property Insurance Corp.
The market is struggling so much that Louisiana Insurance Commissioner Jim Donelon has called the current circumstances a “crisis.”
In response, the Louisiana Insurance Guaranty Association (LIGA) has begun to restructure its management of claims for policyholders of insolvent insurers using property estimating technology from Verisk, a global data analytics provider.
“Seamless coordination with independent adjusting firms has become critical as we work to help hurricane victims throughout Louisiana rebuild their homes and return to normal,” said John Wells, executive director of LIGA.
More work to be done
A 2020 Triple-I Consumer poll found that 27 percent of homeowners said they had flood insurance, which indicates a record high. However, this figure is greater than National Flood Insurance Program (NFIP) estimates. As the Triple-I notes, homeowners may not understand what flood coverage is and how it works — specifically, that flood damage is not covered under standard homeowners’ and renters’ insurance policies. Flood coverage is available as a separate policy from the National Flood Insurance Program (NFIP), administered by the Federal Emergency Management Agency (FEMA), and from many private insurers
As storms continue to wreak major damage across vulnerable areas, homeowners and flood insurance are more important than ever. But risk transfer alone is not enough.
“Risk transfer is just one tool in the resilience toolkit,” says Triple-I CEO Sean Kevelighan. “Our understanding of loss trends and expertise in assessing and quantifying risk must be joined at the hip to technology, public policy, finance, and science. We need to partner with communities and businesses at every level to promote a broad resilience mindset focused on pre-emptive mitigation and rapid recovery.”
This year’s hurricanes have served as a wakeup call about the importance of flood insurance and the fact that not enough people have it. Only 1 in 6 homes in the United States is insured against flood, yet 90 percent of natural catastrophes in the country involve flooding.
More of the population is moving into flood-prone areas. Not only does this increased residential and commercial development put more people in harm’s way, it reduces the amount of land available to absorb excess water. This means more homes and businesses inundated, more contents damaged or destroyed, and more vehicles immersed.
Nowadays, flooding tends to cause more costly damage than wind. An average storm year will generate uninsured losses of $10 billion due to flooding, compared to insured losses of $5 billion.
“One of the most frustrating things for our industry related to flood is that this is actually an insurable peril and it’s broadly uninsured,” said Keith Wolfe, president of U.S. property & casualty insurance at Swiss Re. Wolf recently spoke with Triple-I CEO Sean Kevelighan, in the latest edition of Triple-I’s Executive Exchange, about closing the flood-protection gap.
That’s changing, however, as the public and private sectors work together to improve consumer behavior and harden communities. The private market is slowly but surely closing the flood protection gap as it emerges as a viable complement to the National Flood Insurance Program.
Improvements in modeling are making this peril more insurable, and private companies are recognizing the flood-insurance opportunity and entering the market. According to Swiss Re, flood represents a $1.1 billion growth opportunity for insurers.
Standard homeowners and renters insurance policies include additional living expenses (ALE) coverage. ALE pays the costs of living away from home—above and beyond your customary expenses— if you cannot live at home due to damage caused by an insured event that makes the home temporarily uninhabitable.
What expenses are typically covered by ALE?
ALE covers living expenses incurred by you so your household can maintain its normal standard of living. These expenses could include:
Grocery or restaurant bills
Transportation (e.g., if your temporary home requires a longer commute)
Your homeowners policy’s ALE coverage is usually equal to 20 percent of your home’s insured value—a home insured for $200,000, for instance, may have ALE coverage of up to $40,000—or limited to a certain timeframe (e.g., no more than 12 months).
What about Damage from Hurricane Ida?
Standard ALE coverage should be triggered if damage from a covered peril (e.g., wind and rain) caused the home to be uninhabitable. In addition, some companies provide ALE coverage when policyholders leave their home or apartment due to mandatory evacuation orders. Policyholders should speak with their insurance professional to confirm whether their policy provides ALE coverage for their situation.
As a reminder, standard homeowners insurance policies typically do not provide coverage for flood damage. The National Flood Insurance Program (NFIP) covers physical damage from flood but does not include ALE. Some privately sold flood policies offer ALE following flood losses.
What Other Help Is Available?
Federal assistance has been made available through the Federal Emergency Management Agency (FEMA). On September 2, FEMA announced they will cover hotel expenses for survivors of Hurricane Ida with damaged homes or dwellings in 25 parishes in southeast Louisiana.
The program, known as Transitional Sheltering Assistance, will provide survivors with short-term housing free-of-charge as they recover from the Category 4 storm. Survivors must first register with FEMA at disasterassistance.gov or by calling the FEMA helpline at 800-621-3362. Those wishing to take advantage of the program must find and book their own hotel rooms. Participating hotels are listed at www.femaevachotels.com.
The Insurance Information Institute is working with insurers in the aftermath of Hurricane Ida to monitor property damages and assist consumers as they recover. In this video, Triple-I CEO Sean Kevelighan provides guidance for homeowners to help them ensure a smooth claims experience and avoid being taken advantage of by unethical contractors and other scammers who tend to emerge after disasters.
“Right now, the most important thing those impacted by Ida can do is remain safe and stay out of the way out of recovery workers,” Kevelighan says. “The storm may have passed, but remember that new dangers may be lurking.”
In particular, he points to threats from downed electrical wires and washed-out roads and bridges. Kevelighan also emphasizes the importance of quickly reporting property damage to your insurer.
Losses from the winter storm that swept through the southern United States earlier this year continue to loom large among the concerns of property and casualty insurers, even as the nation contends with wildfires and anticipates yet another above-average hurricane season.
“On its own, Uri would not necessarily impact premium rates,” says Dr. Michel Léonard, CBE, Triple-I vice president and senior economist. “What matters is the overall severity of extreme weather events during a calendar year or a specific peril season.”
Dr. Léonard reports that current expectations among weather experts of higher-than-average hurricane and wildfire seasons – in addition to Uri – will likely contribute to increases in property insurance rates in 2021, “before and regardless of inflation.”
“Traditionally, actuarial models keep natural catastrophe losses and inflation separate and combine them in the last stage of rate estimates,” Léonard says.
Three 2021 trends, he says, add up to put upward significant pressure on insurance rates for 2022:
Combined 2021 natural catastrophe losses from winter storms, hurricanes, and wildfires expected to be above annual averages;
Overall inflation in the U.S. currently forecast to be between 4% and 6% for 2021, the highest in a decade; and
Industry-specific inflation above the national average for construction materials and labor due to COVID-19 supply-chain disruptions.
“There are a few situations in which extreme weather events directly contribute to replacement cost increases, which, in turn, impact rates,” Léonard says. “But ‘price gouging’ – such as happened after Uri – shouldn’t be confused with inflation. It’s temporary, while inflation almost always endures.”
One of the benefits of social media is the fact that it reminds you what was on your mind several years earlier. Today I was reminded of the horrific flooding in Ellicott City, Md., that occurred three years ago this week.
This event resonated for me because I had friends living there, and I lived in a similarly situated flood-prone town. The images from Ellicott City recalled for me the damage much closer to home, in Bound Brook, NJ, when Tropical Storm Floyd dropped over 13 inches of rain and the Raritan River crested at above 42 feet, inundating the downtown and sparking fires as electrical systems shorted out.
My little town of Dunellen had dodged a major bullet, I realized as I watched on TV as firefighters in boats responded to the devastation next door. Our basement, turned temporarily into an indoor swimming pool, seemed a minor inconvenience next to the losses in Bound Brook and elsewhere.
A few years later, my region would be visited by similarly shocking images in the aftermath of Hurricane Irene and Superstorm Sandy.
We’ve written a lot about flood risk, the flood protection gap, and the need for a resilience mindset to prevent damages and loss wherever possible and help families, businesses, and communities bounce back from unavoidable disasters. But sometimes a few images can persuade more eloquently and effectively than all the words in the world.
Florida Governor Ron DeSantis last week signed two bills that lawmakers say will leave Florida better prepared for future flooding and sea level rise.
The legislature’s approval of these measures and the governor putting his signature on them is one of those moments that seem to mark a real change in awareness of and attitude toward this often-minimized risk. As the Tampa Bay Timespoints out, “Florida’s legislature for most of the last decade has taken little action and entertained hardly any public discussion about sea level rise.”
The bills, SB 1954 and SB 2514, will — among other things — set aside hundreds of millions of state dollars for flooding infrastructure projects. It requires the Department of Environmental Protection to prepare a flooding and resiliency plan and provides up to $100 million a year to communities that identify areas along the coast and other waterways that are at risk from sea level rise.
“This is a really significant amount of resources,” DeSantis said at a bill signing ceremony in Tarpon Springs. “We’re really putting our money where our mouth is when it comes to protecting the state of Florida, particularly our coastal communities, from the risks of flooding.”
On the leading edge of sea level rise
Florida’s 1,350 miles of coastline is the lifeblood of its tourism industry. Given the fact that much of the state sits at or near sea level on a foundation largely composed of porous limestone, it is particularly vulnerable to the threat of rising seas. Some areas of the state are already seeing flooding on clear days during particularly high tides, according to the Associated Press.
The magnitude of the threat is illustrated by the fact that three Florida-based insurers recently announced that they will not be renewing more than 53,000 property policies as of June – just as the 2021 Atlantic hurricane season begins. The first named storm of the season — Subtropical Storm Ana — formed early on May 22, northeast of Bermuda.
Florida statute Chapter 224 Part III allows insurers to cancel policies when the company would be placed in a hazardous financial situation due to an uptick in claims after hurricane damage or attorney’s fees to defend itself over fraudulent adjuster claims.
Dulce Suarez-Resnick, past president of the Latin American Association of Insurance Agencies, said this kind of widespread cancellation is common after subsequent years of heightened hurricane activity.
“It’s not the end of the world or that they’re bad companies,” Suarez-Resnick said. “It’s that these companies were weakened by prior storms and the bill for the reinsurance got heftier. That’s where we are today.”
Thanks to the insurance industry’s longtime focus on assessing and quantifying catastrophe risk and the rise of sophisticated modeling capabilities, insurers are ideal partners for addressing these evolving risks.