Fifth Anniversary Of Hurricane Wilma—How Has The Property Insurance Market Changed?

Wilma Was Florida’s Last Major Hurricane; Reopened And New Insurance Claims Are Part Of Its Legacy

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TAMPA, FL, October 20, 2010 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 blowingwith 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.

Hurricane Wilma Summary Data
As of 4/30/2006
Estimated Gross Probable LossClaims ReportedTotal Loss ClaimsClaim Payments Made
$9,659,383,823 975, 717 23,093 $8,848,995,529

Source: Florida Office of Insurance Regulation.

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 yearsfrom 2007 through 2009which makes the premium amount less relevant as a comparison.
LEADING HOMEOWNERS INSURANCE COMPANIES IN FLORIDA (1)
($000)
2009 Rank2005 RankCompanyDirect premiums written, 2009Direct premiums written, 2005
1 1 State Farm Florida Insurance Co. $888,326 $1,175,849
2 2 Citizens Property Insurance Corp. 790,756 511,493
3 21 Universal P&C Insurance Co. 507,450 77,651
4 26 St. Johns Insurance Co. 269,871 64,285
5 7 United Services Automobile Association 216,976 157,367
6 51 Florida Peninsula Insurance Co. 173,244 20,291
7 NR Royal Palm Insurance Co. 153,912 NA
8 NR HomeWise Preferred Insurance Co. 150,588 NA
9 11 Federal Insurance Co. (Chubb) 144,222 110,634
10 33 American Home Assurance Co. (AIG) 141,905 49,404
11 8 Liberty Mutual Fire Insurance Co. 141,887 138,817
12 3 Castle Key Insurance Co. (Allstate) 137,169 375,827
13 12 United P&C Insurance Co. 134,906 104,978
14 14 USAA Casualty Insurance Co. 128,690 96,577
15 4 Nationwide Insurance Co. of FL 128,325 269,153
16 20 Universal Insurance Co. of North America 112,222 81,510
17 NR Northern Capital Insurance Co. (2) 103,482 NA
18 NR Security First Insurance Co. 93,783 NA
19 NR Homeowners Choice P&C Insurance Co. 92,683 NA
20 25 Sunshine State Insurance Co. 91,364 69,634

(1) Based on 2009 direct premiums written.
(2) Northern Capital was ordered into liquidation in May 2010.

NR=Companies were Not Ranked among the Top 100 insurers in Florida in 2005.

NA=Not applicable.

Source: SNL Financial LC.

 

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