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More on Hurricane Wilma: How Has the Property Insurance Market Changed?

Source: III

Posted on 26 Oct 2010

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Hurricane Wilma was the fifth costliest natural disaster in U.S. history, the sixth major hurricane of the record-breaking 2005 hurricane season. It struck Florida on October 24, 2005, hitting the southwest coast of Florida as a Category 1 storm, near Naples around 7 a.m., bringing wind gusts greater than 120 mph in some areas, and exiting near Palm Beach more than four hours later, with Category 2 conditions. Five years later, some insurers will tell you that the winds of Wilma are still blowing—with reopened claims and new claims still coming years after the storm.

No statewide data has been collected on Hurricane Wilma claims since the Office of Insurance Regulation (OIR) released summary data (see chart below). However, property insurers have said that reopened claims from Hurricane Wilma far outpace those from previous storms, with some insurers finding that 25 percent of claims considered closed and satisfactorily settled years ago are being reopened. Additionally, some insurers have reported that new claims from Hurricane Wilma are coming in at an average rate of over 50 a month. That may end soon as a number of insurers follow the dictates of Florida Statute 95.11, which provides that an insured or claimant has five years to bring legal action against an insurance company, for example, when a claim is denied or an insurance contract is violated. Other insurers say their policy language simply advises policyholders to inform them of damage as soon as possible, without such a deadline, so strict time limits may not apply.

What is the problem with reopened and new insurance claims from five years ago? “It means that private insurance companies are still paying bills from the 2005 storm, as is the state-run insurer, Citizens Property Insurance, and everyone else in the state with a homeowner, business or automobile insurance policy, through assessments on their policies,” said Lynne McChristian, Florida representative for the Insurance Information Institute (I.I.I.).

“While private insurance companies are handling reopened claims with funds set aside in advance to pay these new and reopened claims, most Floridians don’t realize they will be paying for Hurricane Wilma for four more years.”
Reopened claims prompted the Florida Hurricane Catastrophe Fund to sell additional bonds to reimburse insurers for claims from the 2005 storms, which included Dennis, Katrina, Rita and Wilma. Those bonds caused the assessment amount to rise from 1 percent of the total premium a policyholder pays to 1.3 percent on all homeowners, commercial and automobile policies, beginning in January 2011 and extending through 2014.
Hurricane Wilma was also a major flood event, ranked 10th in terms of historical claims payouts by the National Flood Insurance Program (NFIP). The NFIP paid 9,591 flood claims totaling $362 million.
To understand how Florida’s property insurance market has continued to evolve in the five years since Hurricane Wilma, see the chart below. Several insurers currently listed among the Top 20 homeowner insurance companies were not ranked in 2005, either because their market share was too small or they had not yet been formed. Additionally, while Citizens Property Insurance is ranked second in terms of total direct written premiums, there are two important considerations to keep in mind:
    - Citizens is the state’s largest insurer based on the number of policies, with 1,237,289 policies in force as of September 30, 2010
    - Citizens’ rates were frozen by the Legislature for three years—from 2007 through 2009—which makes the premium amount less relevant as a comparison