Category Archives: Hurricanes

IICF Starts Ian Relief Fund

The insurance industry’s efforts on behalf of people struggling in the wake of disasters doesn’t end with paying policyholder claims.

The nonprofit Insurance Industry Charitable Foundation (IICF) has launched the IICF Hurricane Ian Relief Fund to support those in need in the wake of Hurricane Ian. Funds will benefit Team Rubicon, a nonprofit providing emergency response and relief throughout affected areas, and SW FL Emergency Relief Fund, which provides critical support to nonprofits and people in areas experiencing immediate need.

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.”

With the help of the insurance industry, IICF has been able to raise $2.3 million over the past few years to benefit nonprofits responding to disaster and pandemic needs across the United States and the United Kingdom. To donate to the current effort, please visit https://give.iicf.org/campaigns/23664-iicf-hurricane-ian-relief-fund.

Lawsuits Threaten
to Swell Ian’s Price tag

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 Business America.

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.”

As Building Costs Grow, Consider Your Homeowners’ Coverage

By Max Dorfman, Research Writer, Triple-I (07/14/2022)

Home construction and maintenance costs are on the rise, and homeowners should be factoring these trends into their insurance decisions – especially as risks related to weather and climate intensify.

Rising interest rates and persistent disruptions in the building-materials supply chain can affect repair and replacement costs for purposes of homeowners’ insurance. However, a recent American Property Casualty Insurance Association (APCIA) survey found that approximately two-thirds of insured homeowners could be without key additional coverages – including automatic inflation guard, extended replacement cost, and building code/ordinance coverage – that could more effectively protect their investment.

“Inflation, recent supply chain issues, and increased demand for skilled labor and construction materials following unprecedented natural disasters in the last two years have contributed to a significant increase in the costs to rebuild homes and businesses,” said Karen Collins, assistant vice president of personal lines at APCIA. “It is imperative that homeowners review and, if needed, update their insurance prior to hurricane season to keep pace with rising costs.”

Most homeowners’ policies today cover replacement cost for structural damage, but it’s wise to check your policy – especially if you have an older home. A replacement cost policy will pay for the repair or replacement of damaged property with materials of similar kind and quality.

The limits of your policy typically appear on the Declarations Page under Section I, Coverages, A. Dwelling. Your insurer will pay up to this amount to rebuild your home. If the limits of your homeowners’ policy haven’t changed since you bought your home, you may be underinsured – even if you haven’t made any upgrades.

Many insurance policies include an “inflation guard” clause that automatically adjusts the limit to reflect current construction costs in your area when policies are renewed. If your policy doesn’t include this clause, see if you can purchase it as an endorsement.

Adding to the threat and potential costs is the steady growth in natural catastrophe losses in recent decades. This year’s Atlantic hurricane season is expected to be “well above average,” and wildfires are starting earlier, inflicting greater losses, occurring in more states, and taking more time to suppress.

Triple-I offers tips on how to properly insure your home for a disaster— which is all the more important given current market conditions, and the escalating threat of catastrophe.

Fraud, Litigation Push
Florida Insurance Market to Brink of Collapse

With its abundance of unneeded new roofs on homes – and flashy lawyer billboards at every turn claiming massive settlements on claims – Florida’s insurance market is on the verge of failure. This man-made catastrophe is causing financial strain on consumers, as the annual cost of an average Florida homeowners insurance policy will skyrocket to $4,231 in 2022, nearly three times the U.S. annual average of $1,544.

“Floridians pay the highest homeowners insurance premiums in the nation for reasons having little to do with their exposure to hurricanes,” said Triple-I CEO Sean Kevelighan.  “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. These two factors contributed enormously to the net underwriting losses Florida’s homeowners’ insurers cumulatively incurred between 2016 and 2021.” 

Two major hurricanes made landfall in the state since 2016: 2017’s Irma and 2018’s Michael.

No direct hits occurred in Florida over the past three hurricane seasons. 

Florida, however, is the site of 79 percent of all homeowners insurance lawsuits over claims filed nationwide, even though Florida’s insurers receive only 9 percent of all U.S. homeowners insurance claims, according to the Florida governor’s office. To illustrate how lawsuits have weighed on insurer operating costs, JD Supra, citing the Florida Office of Insurance Regulation (OIR), reported $51 billion was paid out by Florida insurers over a 10-year period, and 71 percent of the $51 billion went to attorneys’ fees and public adjusters. The 2020 and 2021 cumulative net underwriting losses for Florida homeowners’ insurers totaled more than $1 billion each year.

“The state’s homeowners’ insurers have been forced to respond to these unfortunate market trends this year by restricting new business, non-renewing existing policies, and even canceling policies mid-term,” Kevelighan said. “What’s more, four homeowners insurance companies have been declared insolvent since February — all while more Americans are moving to Florida than any other state.”

Citizens Property Insurance Corp., the state-backed property insurer of last resort in Florida, has seen its policy count rise to nearly 900,000 this month statewide.  Its policy count figure stood at about 420,000 in October 2019.  Citizens provides insurance coverage to homeowners unable to find a private-sector insurer willing to sell them a homeowners insurance policy.

Placing further pressure on the affordability and availability of homeowners’ insurance in the state, third-party rating bureaus have downgraded the financial ratings of some insurers operating in Florida.

The typical Florida homeowners’ insurance policyholder paid $2,505 for coverage in 2020, Triple-I found, and that figure rose to $3,181 in 2021.  Triple-I’s analysis was based on data and analyses from Florida’s OIR, the National Association of Insurance Commissioners (NAIC), and Triple-I’s estimates of what insurers are paying today for home replacement costs.

During a special legislative session in May 2022, Florida lawmakers passed Senate Bill 2B, which Gov. Ron DeSantis signed into law. The measure is aimed at easing homeowners’ premium increases and reducing excessive litigation.

To help Floridians and others residing in natural disaster-prone states better manage risk and become more resilient, Triple-I launched a few years ago its Resilience Accelerator initiative, Kevelighan said.

The Resilience Accelerator’s goal is to demonstrate the power of insurance as a force for resilience by telling the story of how insurance coverage helps governments, businesses and individuals recover faster and more completely after natural disasters. “The insurance industry’s focus on resilience is starting to pay dividends as more Americans recognize the very real risks their residences face from floods, hurricanes, and other natural disasters,” Kevelighan added.

Fla. P&C Crisis Worsens As Hurricane Season Begins

Already this year, three Florida insurers have been declared insolvent due to their failure to obtain full reinsurance as the 2022 hurricane season bears down.

“We have the potential of a massive failure of Florida insurers, probably the worst on record,” says Triple-I communications director Mark Friedlander. According to Friedlander, the $2 billion reinsurance fund created in legislation Gov. Ron DeSantis signed into law at the end of May isn’t nearly enough, and private reinsurers are pulling back from the market because of its high level of property claims and litigation.

“It needed to be at least double the amount of the funds that were allocated for reinsurance coverage for hurricane season and open to other perils as well,” Friedlander said.

Most recently, insurance rating agency Demotech announced that it had withdrawn its financial stability rating for Southern Fidelity Insurance Company after the insurer placed a moratorium on writing new business and processing renewals in Florida until it secured enough reinsurance for hurricane season. When the Tallahassee, Fla.-based insurer failed to do so by the June 1 start of the season, the OIR ordered it to “wind down operations,” indicating the company could become the fourth Florida residential insurer to fail this year, following the liquidations of St. Johns, Avatar, and Lighthouse.

Flood: An Insurable Peril That’s Underinsured

By John Novaria, Managing Director, Amplify

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.

Relocated Due to Ida?
You Might Be Covered
for Additional Living Expenses

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:

  • Temporary housing
  • Moving costs
  • Grocery or restaurant bills 
  • Storage costs
  • Laundry expenses
  • Transportation (e.g., if your temporary home requires a longer commute)
  • Parking fees
  • Pet boarding

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.

Atlantic Hurricane Season Forecast
Reduced Slightly

Colorado State University (CSU) hurricane researchers have slightly reduced their forecast for 2021 Atlantic hurricane activity in an August 5 update.

The CSU Tropical Meteorology Project team, led by Triple-I non-resident scholar Dr. Phil Klotzbach,  predicts 18 named storms this year (down from 20 in the previous forecast), eight of which are expected to become hurricanes (down from nine). Four of the hurricanes are expected to be “major” (Category 3, 4, or 5).

Despite the slight drop in the number of storms, the 2021 hurricane season – which runs from June 1 to November 30 — is forecast to be above average and follows a record-breaking 2020 season. An average season has 14 named storms, seven hurricanes and three major hurricanes.

As Nat Cat Losses Mount,
A Resilience Mindset Matters More Than Ever

Insurance is essential for individuals, businesses, and communities to recover quickly from natural  catastrophes – but perils have evolved to a point at which risk transfer, though necessary, isn’t enough to ensure resilience.

Triple-I CEO Sean Kevelighan said during a that better insured communities recover more quickly but “the long-term resilience of both the communities impacted by natural catastrophes and of the industry itself depend on preparedness and improved risk mitigation.”  He was one of three panelists participating in the webinar.

“Something’s Got to Give”

Insured U.S. natural catastrophe losses totaled $67 billion in 2020 after an Atlantic hurricane season which included 30 named storms, record-setting wildfires in California, Colorado, and the Pacific Northwest, and a severe derecho in Iowa. This year’s hurricane season looks to be more severe; the Bootleg wildfire in Oregon – so large and intense it has begun to create its own weather and is affecting air quality as far east as New York City – isn’t  expected to be fully contained until late November; and these disasters are taking place on the heels of devastating winter storms in the first quarter.

As Kevelighan put it in his panel remarks, pointing to a 700 percent increase in insurer loss costs since the 1980s, “Something’s got to give.”

“As the country’s financial first responders,” he said, “insurers are not just responsible for providing relief to the communities affected by natural disasters, but also planning for potential catastrophes to come.”  

One of the ways insurers do this, he said, is by building the industry’s cumulative policyholders’ surplus—the amount of money remaining after insurers’ collective liabilities are subtracted from their assets. At year-end 2020, the U.S. policyholders’ surplus stood at a record-high $914.3 billion.

Mitigate and educate

The role of the insurance industry has grown beyond merely taking on risks to educating the public, regulators, and corporate decision makers on the changing nature of risk and driving a resilience mindset characterized by a focus on pre-emptive mitigation and rapid recovery. Triple-I and a host of other insurance industry organizations have played a key role in promoting public-private partnerships and using advanced data and analytics to understand and address hazards in advance.

For example, Triple-I’s online Resilience Accelerator provides access to data and risk maps that empowers the public to assess and prepare for risks specific to their own communities.

This webinar, co-presented by The Institutes’ Griffith Foundation and the Insurance Regulator Education Foundation, included panelists Hanna Grant, Head of the Secretariat, Access to Insurance Initiative; and Dr. Abhishek Varma, Associate Professor, Finance, Insurance and Law, Illinois State University. It was moderated by James Jones, Executive Director, Katie School of Insurance and Financial Services, Illinois State University.

Webinar highlights: