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After Irma: Claims pour into Florida insurers; can they handle losses?



Date: September 15, 2017
Source: Palm Beach Post
Author:  Charles Elmore



As millions have struggled without power and some still can’t get back to their homes, Hurricane Irma’s test is only beginning for Florida’s insurance industry, much of it homegrown and founded in the last decade.

About 6 percent of the more than 80,000 customers of Palm Beach Gardens-based Olympus Insurance Co. have called about possible claims, said Jeffrey B. Scott, CEO of the company founded in 2007.

“It is still early days and this number will certainly increase,” Scott said.

 “As a general rule, when the tide goes out you see who’s swimming naked,” Scott said. “However, if you believe current modeled loss results, Irma property damage losses should be well within bounds of Florida domestic property insurers’ claims paying abilities. My personal instincts are that actual losses will be higher than currently projected but still well within insurer capacity.”

Still, two Florida insurers went out of business in 2017 before Irma’s outer bands ever hit, Mount Beacon Insurance Co. and Sawgrass Mutual Insurance Co. Regulators sought other companies to take their policies when they ran into financial trouble.

Irma’s aftermath “may be bleak for some regional and local carriers, particularly overexposed companies with earnings and potential capital concerns,” ratings firm A.M. Best said in a briefing Friday.

At the same time, Irma “will present opportunities for others,” the Best analysis said. “An insurer with a sound business model and strategy that can effectively navigate through the storm may attract displaced insureds. Additionally, smaller or struggling companies may opt to pursue mergers and acquisitions, already occurring in the current market.”

In Boca Raton, Florida Peninsula Insurance Co. CEO Roger Desjadon said his company has received thousands of calls and has hundreds of people answering them, scheduling inspections and preparing to respond.

“Overall, I think the Florida based insurers are as prepared as possible for this type of event and that shows their commitment to the market and their customers and agents,” Desjadon said.

Much of that readiness can be attributed to a sustained emphasis by regulators and ratings agencies on adequate reinsurance, or back-up coverage that insurers buy, he said. To the extent insurers have to tap reinsurance coverage, however, it is likely to lead to higher reinsurance costs and higher consumer premiums down the road.

In the end, Desjadon said, “not all companies will come out of Irma the same,” given different levels of financial resources, geographic concentrations of customers, and varying ability and expertise in dealing with the demands they will face for some time to come.

“Some companies will be more challenged than others,” Desjadon added.

Florida Peninsula recently had about 117,000 customers statewide, placing both it and Olympus among the state’s 25 largest property insurers.

State-run Citizens Property Insurance Corp., Florida’s second largest, had received nearly 16,000 claims by Thursday morning and expects perhaps 125,000 from Irma, a spokesman said. That would represent more than one in four of its total customers.

Most claims so far are coming from Monroe, Miami-Dade and Broward counties as well as southwest Florida, Citizens officials said.

Insurance Commissioner David Altmaier said in advance of the storm, “Consumer protection is our number one priority as Hurricane Irma bears down on Florida. The Office is dedicated to constantly monitoring the financial health of insurers, and in the coming days, we will be available around the clock to address any insurer issues.”

One headache for the whole industry is a shortage of claims adjusters, given that Irma arrived just weeks after Hurricane Harvey in Texas. That marked the first time two storms made U.S. landfall as Category 4 storms in the same season. This could mean delays and higher costs in arranging for adjusters, executives at several companies said.

An emergency order from Florida’s insurance commissioner issued Wednesday evening gives consumers special protections after Irma.

Among other things, the order provides an additional 90 days to policyholders to supply information to their insurance company, prohibits insurance companies from canceling or non-renewing policies covering residential properties damaged by the hurricane for at least 90 days, and freezes rate hikes on policyholders for 90 days, state officials said.

Gov. Rick Scott initiated the process Tuesday with an executive order.

“As Hurricane Irma leaves our state, it is critical that Floridians have every resource available to quickly recover,” Scott said.

Insurers are also concerned about other hazards.

The Florida Property & Casualty Association, representing a number of state-based companies, warned of “pitfalls” associated with contractors who ask homeowners to sign over control of insurance benefits, which industry officials insist can lead to abuses and inflated claims. Some public adjusters and contractors have pushed back against that message, saying “assignment of benefits” is commonplace in the medical industry, for example.

The Consumer Federation of America cautioned against using unlicensed or “fly by night” contractors, but reminded consumers they can seek other professional opinions and quotes if they are not confident adjusters and contractors arranged by the insurance company are offering full and fair payment.

“Not all insurance companies handle claims badly, so go into the claims process with an open mind,” said J. Robert Hunter, CFA’s Director of Insurance and former Administrator of the National Flood Insurance Program and Texas Insurance Commissioner. “Be vigilant, though, and be ready to stand up for yourself and your family, or you run the real risk of being shortchanged.”

Hurricane Irma has been blamed for at least 26 Florida deaths, conditions remain hazardous, and its full financial cost may not be known for years.

Some worst-case forecasts, made when Irma was a Category 5 storm aiming at the southeast Florida coast, have been scaled back given it eventually lost some strength while moving west and strafing Cuba. Still, it devastated portions of the Florida Keys and southwest Florida while dangerous and damaging winds, rain and tornadoes buffeted virtually the entire state.

Karen Clark & Co. this week put U.S. losses covered by insurance companies at $18 billion, most of that in Florida.

AIR Worldwide on Friday said insured U.S. losses could range between $25 billion and $35 billion.

Such estimates typically exclude government disaster aid, flood insurance payments and economic losses, which can push total costs upward in a hurry.

What seems evident now is Irma represents the worst storm to hit Florida in at least 12 years, and not every insurance company covering the state is likely to emerge unscathed or holding the same appetite for policies here.

“I expect many won’t have the stomach for it and they will reduce their footprint here,” Olympus CEO Scott said. “Floridians have seen this movie before. As for Olympus, Florida is our home and our insureds are our neighbors. We aren’t aiming to go anywhere.”


At your fingertips, see multiple financial ratings and complaint information about more than 100 Florida property insurance companies in The Palm Beach Post’s guide:


Need assistance filing an insurance claim, getting a question answered or filing a complaint? Call Florida’s free Insurance Consumer Helpline, run by the Department of Financial Services, at 1-877-693-5236.

Need help figuring out how to apply for Federal Emergency Management Agency assistance? Attend the FEMA Disaster Assistance Sign-Up Event on Saturday Sept, 16, from 10 a.m. to 1 p.m. at the Greenacres Branch Library. For more information: (800) 621-3362