Industry Outlook 2005
It won't be Andrew-esque, but the insurance fallout from Hurricanes Charley, Frances, Ivan and Jeanne will dominate the market this year. The industry blew through its reserves and then some to cover $17.5 billion in insured wind losses in Florida.
"Some rate increases are going to be necessary," says Sam Miller, executive vice president of the Florida insurance Council. Customers may have trouble getting coverage. In November, Allstate announced it would stop writing new policies in most of Florida after losing the equivalent of all of its Florida policy profits since 1992.
Meanwhile, the industry is preparing to fight any hurricane-inspired regulation it finds burdensome. The justification: "It's going to continue to be tight in the homeowners market until Florida can attract capital for what's been spent," says William Stander, regional manager for the Property Casualty Insurers Association of America. Insurers want to tap the state's hurricane catastrophe fund earlier rather than suffer the same double-deductible bite homeowners felt.
The hurricanes affected commercial premiums as well. Robert Hartwig, chief economist for the insurance Information Institute, says Florida won't see the same drop in commercial premiums the nation will see, but Florida will be a competitive market "with a lot of capacity." On a November visit, "I saw no shortage of buildings going up. The coverage is there."
2005 Forecast: "We see a firming in property rates," says J. Hyatt Brown, chairman and CEO of Brown & Brown. "It's obviously due to the hurricanes. Any property that is coastal in Florida is going to have increased property pricing or face substantial windstorm deductibles. ... There's always been activity for mergers and acquisitions. That trend has been in place since 1947. It's going to continue."