DAILY TRIFECTA: Mother Nature's Bill Is Coming Due
You can deny the risks, but that won't stop 'em
TITLE: The 'red flags' in INSURE Act natural catastrophe reinsurance program bill
https://www.insurancebusinessmag.com/us/news/catastrophe/the-red-flags-in-insure-act-natural-catastrophe-reinsurance-program-bill-475765.aspx
EXCERPT: Millions of Americans are squaring up to a homeowners’ insurance affordability and availability crisis, aided by climate change impacts, and legislators are set to grapple with whether a federal reinsurance backstop that has garnered insurance industry opposition could offer a solution.
Representative Adam Schiff’s Incorporating National Support for Unprecedented Risks and Emergencies (INSURE) Act, introduced as a Bill in early January, will test the waters over whether legislators believe a government-led $50 billion reinsurance program could cut homeowners’ and property insurance costs for policyholders in a hard market and encourage capacity back into states, like California and Florida, that have so far borne the brunt of constrictions and exits.
Under the bill, the federal property reinsurance program would offer cover for wind and hurricane, flood, wildfire, and severe convective storm. Feasibility studies into bundling in earthquake cover, in addition to relocation funding, are also mooted.
Schiff – of wildfire-prone California – has labeled the bill a “critical step forward” in protecting vulnerable individuals, and policyholder advocate organizations including United Policyholders and Consumer Watchdog have thrown their backing behind it, but the would-be legislation has so far met with strong insurance industry resistance.
The INSURE Act could “put families at risk of losing access to the coverage they need,” American Property and Casualty Insurance Association (APCIA) president of federal government relations Nat Wienecke said in January.
A federal re/insurance program is “not needed” and could drive insurance costs up further while shifting the burden away from global reinsurance markets and on to the American taxpayer, Lee Covington, Reinsurance Association of America (RAA) president told Insurance Business.
That property reinsurance costs have spiked is not at issue; global property catastrophe reinsurance rates rose by 37% in the January 2023 renewals, the biggest hike since 1992, according to broker Howden. An upwards trajectory continued into 2024 with rates stabilizing somewhat to rise 3% according to Howden’s latest 1/1 renewals analysis.
Amid this pivotal shift, then, it is perhaps unsurprising that reinsurance has come under scrutiny, with US consumer advocates like Consumer Federation of America director of insurance Douglas Heller having blasted rises and the “unregulated” nature of global reinsurance contracts.
However, reinsurance and insurer representative associations have contended that the INSURE Act would fail to tackle the root causes of rising rates and could have unintended consequences for insurance markets and the policyholders they serve, potentially leaving taxpayers footing the bill for spiraling costs as a result.
Some of these aforementioned root causes – including natural catastrophes that drove $123 billion in global insured losses and $357 billion in economic losses ($116 billion excluding earthquakes and non-atmospheric-driven events) as per Gallagher Re analysis, and geopolitical and economic and inflationary pressures – are being felt not just US-wide but across the globe. Others are being felt at a state level, insurance industry sources have contended.
Legal system abuse, “outdated” regulatory systems, and the continued accumulation of populations and properties in at-risk areas, are all responsible for skyrocketing insurance costs in certain states, insurance industry stakeholders have set out.
Further, well-intended as the Bill may be, reinsurance subsidization could have a dangerous effect on encouraging developer growth in catastrophe-prone areas despite a relocation feasibility study also mooted in the potential legislation, with the ultimate result being higher demand for federal assistance when disaster hits and a burden placed on those living in areas not affected, sources said.
Effectively, sources said, insurance and reinsurance costs are a symptom of much bigger problems.
America is not facing an insurance crisis, but rather a “risk crisis”, Mark Friedlander, Insurance Information Institute (Triple-I) director, corporate communications, told Insurance Business.
TITLE: Insurers such as State Farm and Allstate are leaving fire- and flood-prone areas. Home values could take a hit
https://www.cnbc.com/2024/02/05/what-homeowners-need-to-know-as-insurers-leave-high-risk-climate-areas.html
EXCERPT: Darlene Tucker, 66, and Tom Pinter, 68, are longtime homeowners in Sonora, California. The couple bought their “dream home” 18 years ago and have been enjoying their retirement from their respective jobs in manufacturing.
Tucker also cares for her horses and a rescued 100-pound tortoise on the property, and runs a dog day care center to help make ends meet. She said Pinter also works as a delivery driver to help out.
The couple received a nonrenewal notice from Allstate in November. Tucker told CNBC she has been working with her Allstate agent to find another insurer.
“I had one company step up and said they’d do it for $12,000 a year,” she said — that’s roughly six times her previous annual premium under Allstate of about $2,000.
She said there was no way the couple could afford that new policy, and they would likely have to move.
But Tucker and Pinter may find that selling their home also comes with a steep cost.
Porter said First Street Foundation’s research in California concluded that “the moment that an individual gets a non-renewal letter from the private insurance market, they essentially lose 12% of their property value.”
Experts say the insurance landscape in California is particularly tricky because, in addition to the wildfire risk, the state has a law that adds extra approval measures, including board approval and review by the insurance commissioner, if an insurance company wants to raise the rate of insurance by more than 7%. That’s been in effect since the 1980s.
Kevelighan, of the Insurance Information Institute, said that law, called Proposition 103, creates a regulatory environment in California that restricts the industry from adequately including climate risk in its forecasting and is one of the reasons the industry is being forced to pull back coverage in the state.
“Risk management does not come into play until it’s entirely too late when it comes to individual personal property purchasing,” Kevelighan said. “It comes into play when the mortgage provider needs you to go get it.”
“And that’s the first time when a consumer even begins to think about where they’re living and what the risks might be,” he said. “The cost reflects that risk. That should be an alarm to tell them that they’re living in a risky place and then ask themselves: How could I reduce that risk? Or do I need to think about living somewhere else?”
TITLE: Florida’s surging home insurance costs rattle seniors who want to keep houses: ‘Do I start packing?’
https://nypost.com/2024/02/01/business/floridas-surging-home-insurance-costs-rattle-seniors-who-want-to-keep-houses/
EXCERPT: “With each and every storm, insurance companies either stop writing in Florida or they greatly spike up their prices in response to it,” Ryan Thaler, vice president at Tampa-based mortgage lender CambridgeHomeLoan.com, told The Post.
Seniors in the state who rely on Social Security checks and other sources of fixed income are now pondering what the future holds.
“Every day I get up and think, ‘Well, do I start packing?'” 72-year-old Ellen Fincher of Vero Beach told WPTV-TV.
Fincher, who has owned the $360,000 three-bedroom, 2,800-square-foot home for 10 years, told the station that her $13,000 annual premium has increased to the point where she can no longer afford to pay.“I can’t, not when you’re on a fixed income,” Fincher said. “You live alone, who will help you?”
Homeowners insurance in Florida ranges from $1,700 to $2,700 per year based on $300,000 in dwelling coverage and $100,000 of liability coverage, according to US News.
The insurance is required for those seeking a mortgage, forcing many buyers to reconsider how much they are willing to spend.
“People are using cash and foregoing insurance on single-family homes,” said Michael Martirena, a luxury real estate advisor at Miami-based realtor Compass.
About 15% of homeowners in the state don’t have property insurance, compared with the national average of 7%, according to the Insurance Information Institute, a research organization funded by the insurance industry.