In the aftermath of Hurricane Irene, thousands of homeowners along the Atlantic coast are wondering what effects the hurricane and others this season will have on their insurance rates. In Florida, who avoided serious damage from the most recent storm, laws are in place which disallows the state from using losses elsewhere as an excuse to raise rates in Florida.
A new piece by Bob Rathgeber recently published in the Fort Myers News-Press, discusses the effects of Hurricane Irene on Florida’s insurance market and the possibility of rate hikes. The article featured several comments from Don Brown, former Florida State Representative and Senior Fellow at The Heartland Institute. In the article Brown argues that, “there is a global system of catastrophic losses that reinsurers have to cover … the direct impact of the hurricane would be very minimal.”
“Don Brown of DeFuniak Springs, a former state legislator who was chairman of the House Insurance Committee and is a noted national insurance expert, said since Irene missed Florida and aimed its fury to the north, any impact on higher rates would be because of reinsurance.
“You might see some upward pressure on reinsurance,” Brown said. “It’s unlikely there would be any immediate impact. It would down the road.”
Reinsurance is insurance that is purchased by one insurance company from another for risk management, transferring risk from the insurer to the reinsurer.
“When compared to the tsunami in Japan and the earthquakes in New Zealand … there is a global system system of catastrophic losses that reinsurers have to cover … the direct impact of the hurricane would be very minimal,” he said.”
Brown also commented on the effects of Irene damage in other states; because companies can’t use losses in other states to raise their rates in Florida, there should be a significant rate hike.”
Florida is not alone in its exposure to coastal storms, Brown mentions Florida and New Jersey as two states particularly susceptible to storm damage.
“Brown is often called on to review the insurance situation such as the one Irene is posing. Since leaving the Legislature, he has been a senior fellow with the Heartland Institute, a nonprofit research and education think tank where he specializes in insurance policy.
“When compared to all other states, New York is second only to Florida surrounded by water,” Brown said. “Connecticut is second only to Florida with a concentration of coastal population … 79.3 percent of our exposure is coastal counties. In Connecticut it’s 65 percent.
“There’s a lot of exposure in New Jersey as well,” Brown said. “The larger the loss, the more likely an increase.”
The Fort Myers News-Press article featuring Don Brown, “Hurricane Irene’s effect on Florida insurance rates thought minimal,” can be found online at: http://www.news-press.com/article/20110828/WEATHER01/108280396/Hurricane-Irene-s-effect-Florida-insurance-rates-thought-minimal?odyssey=mod|breaking|art2.
