All Florida policyholders will have to pay if insurers can't cover Ian's destruction [South Florida Sun-Sentinel]

South Florida might be spared a direct hit from Hurricane Ida, but insurance customers in the region and throughout the state could be stuck helping to pay the bill if the storm causes severe damage along its ultimate path.

While it's still early to project exactly how much damage it's going to create, industry analysts have been studying computer models and trying to predict how much the storm is going to cost.

Scenarios from Karen Clark & Co. issued privately to insurance industry clients on Tuesday included the possibility of Ian coming ashore at Longboat Key, just south of Tampa Bay, and causing around $30 billion in insured wind damage and $2.5 billion in flooding damage along a northeastern path toward St. Augustine.

Later on Tuesday, the company released another model showing the storm causing $17 billion in insured wind damage and $2 billion in flood damage after coming ashore farther south in Venice.

Hurricane Irma in 2017 caused $32 billion in insured losses, Reinsurance News reported in 2019.

Forecast models on Wednesday showed Ian entering the state between Fort Myers and Sarasota regions and exiting in Volusia County, near Daytona Beach.

A damage-cost model for that scenario was not available Wednesday. But with recorded wind speeds intensifying to near-Category 5 strength overnight since Tuesday, insured losses could exceed earlier estimates.

"The storm is going to cause a lot of damage, insured and uninsured," said Locke Burt, chairman and CEO of Security First Insurance Co. "The wind speed has increased and as the wind speed increases the damage amount increases exponentially."

Ian is expected to cause widespread damage and flooding not only along its primary path, but in other areas of the state that will suffer spinoff effects such as heavy rain, flooding and tornados.

Mark Friedlander, communications director for the industry-funded Insurance Information Institute, said Ian could cause up to $35 billion in property losses, and much of it will come from flooding.

Property insurance only covers wind-driven flooding. Rising flood waters, including floods caused by storm surge, is primarily covered by the Federal Emergency Management Agency's National Flood Insurance Program. Yet only 13% of Florida residents have flood insurance, he noted.

"Those without flood coverage will have to rely on FEMA emergency grants that would only cover a small portion of losses," he said. "FEMA funds are not a replacement for insurance coverage."

Ian comes at a bad time for Florida's insurance market, which has endured five straight years of collective operating losses and was poised to lose $1 billion in 2022 even without Ian coming to the state.

Homeowners have seen premiums double over the past four years and now pay the highest average premiums of all 50 states. Increasing weather severity, claims fraud and high rates of litigation helped push six insurers into insolvency this year, and an unknown number of surviving companies were not able to secure as much reinsurance -- that's insurance insurers pay -- as they had planned.

Customers of state-owned Citizens Property Insurance Corp. could face hundreds of dollars in assessments and surcharges if surpluses and reinsurance of any or all of the company's coastal, personal lines or commercial accounts are tapped out. The company, which also did not buy as much reinsurance as it wanted this year, has $6.8 billion in surplus, plus another $6.7 billion in reinsurance and catastrophe bonds across the three accounts.

If combined Citizens losses exceed $13.5 billion in the three accounts, state law authorizes the company to get recouped this way:

Under a worst-case scenario, typical Citizens customers with a $3,000 insurance premium could be required to pay another $2,250 while private-market insurance customers could be billed $960.

Smaller private-market insurers that spend 15% of their surplus and all of their private-market reinsurance will be eligible to tap into the Florida Hurricane Catastrophe Fund's $16 billion in claims-paying ability. That consists of $12.6 billion in cash and $3.5 billion in pre-event bonds. If the CAT Fund takes a substantial hit, state law allows it to recoup that money by imposing assessments on most property and casualty customers in the state.

Meanwhile, if Ian forces any other company into insolvency, Florida insurance customers will pay those companies' outstanding claims through surcharges of up to 2% of their insurance bills levied by the Florida Insurance Guaranty Association. The guarantor, known as FIGA, is already charging policyholders to cover debts of five failed insurers and could soon take on debts of a sixth, FedNat Insurance Co., which was declared insolvent last week.

A.M. Best noted in a commentary released Tuesday that Ian will test whether the $2 billion "Reinsurance Assist Policyholders" (RAP) program enacted during a special legislative session in May was enough to help stabilize the market.

Paul Handerhan, president of the consumer-focused nonprofit Federal Association for Insurance Reform, said he's concerned about Ian's potential effect on cost and availability of reinsurance next year.

Prior to June 1, many insurers struggled to find reinsurance capacity at affordable rates. Most of the companies that were declared insolvent did so because they were unable to secure state-required levels of reinsurance.

"No one is talking about how this storm is going to further contract the reinsurance market's appetite to cover catastrophic risk moving forward and what happens to those primary insurers that cannot obtain reinsurance to complete their future reinsurance programs," Handerhan said.

If reinsurance costs go up next year, insurers will of course recoup those increases by hiking rates.

Not all companies are facing Ian on shaky ground.

Amy Rosen, chief marketing officer of Deerfield Beach-based People's Trust Insurance, said her company has "more than what's financially required by the state and we are prepared to make good on all covered losses."

She added, "This is why we're here. We prepare for situations like Ian every single day of the year."

Melissa Burt Devriese, president and secretary of Security First Insurance Co., said her company's modeling suggests that Ian will play out similar to 2017 s Hurricane Irma across its book of business, which is concentrated along the Interstate 4 corridor that connects Tampa to Daytona Beach.

The company, with about 169,000 policies, expects 20,000 claims and insured losses ranging from $200 million to $250 million.

Devriese says the company stands ready with $700 million in reinsurance capacity. "I see this as an opportunity," she said. "Our job is to show our customers that we're going to be there when the storm hits."

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