Finally, a bit of good news about insurance rates: ‘Once in a while, Florida gets lucky’
Premiums for most
And those factors are expected to trigger rate hikes for most area property owners again this year.
But here's a bright spot, such as it is: Your 2018 policy cost won't increase as much as insurance executives had expected following
That's because rates for reinsurance -- which is the insurance that insurance companies pay to help them pay claims after a catastrophe -- only increased an average 1.2 percent for the 2018 Florida hurricane season that began
The increase is a turnaround from the previous six years of reinsurance rate decreases. But a 1.2 percent increase is considerably lower than what most insurers were expected to pay,
But "because everyone thought that, all this money came pouring into the marketplace [from investors] wanting a piece of the action," he said.
And because so much money was available to sell to insurance companies, reinsurers had to keep rates low just to compete, Patel said.
"Suddenly, you ended up with too much [capital] chasing the business. So the rate increases didn't happen."
And while that might not have made the investors happy, it's a windfall for policyholders, he said.
"Once in a while,
Reinsurance rates as a whole are 40 percent lower than they were in 2012,
One of the biggest reasons is investors have found they can realize higher yields in the reinsurance market than they can by parking their money in bonds and other traditional investments, said
That has enticed "alternative capital" such as "insurance-linked securities markets" to enter the reinsurance game, leading to situations like this year's "negligible rate rises despite
"This is a significant contrast to previous large-loss years which were all followed by significant -- often double-digit -- rate increases," the report said.
Another reason reinsurance rates remain low in
The sustainability of insurance markets, and the cost of insurance, correlates with how wide risk is spread -- both geographically and what risks are covered, Neal said. For instance, an insurer with policies spread equally across 50 states is far less likely to be put out of business by a
Spreading risk is why FAIR would like the federal government to require homeowners with federally backed mortgages in
Currently, there's no such requirement for residents of those states, even though Floridians with federally backed mortgages must buy hurricane insurance.
"That's the real way to get
As for whether the cheap reinsurance trend continues for
And if
Still, Neal cautioned against rooting against reinsurers making money. Insurance regulators require
"The reality is the fact that [reinsurers] have capital deployed the way they do makes
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