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WHEN I WAS A NEWSPAPER reporter in Florida in the early 1980s, we were preoccupied with the chance that a hurricane would spin out of the Gulf of Mexico and slam into Florida’s West coast. It would be the biggest story of our lives if a big one struck the low-lying coastal city of St. Petersburg. It never came our way, fortunately for everyone.
The most serious storm I covered back then was called the “no-name storm” because it didn’t muster hurricane-strength winds. It broke windows in my favorite diner and sent waves sloshing over low-lying Anna Maria Island but did no lasting damage.
We had such a dearth of hurricanes that The St. Petersburg Times resorted to publishing a make-believe account imagining what might happen if a big storm hit the area. Our weather writer, who had an overwrought fiction style, wrote it. It was not our finest hour.
Times have changed. As I write this on October 8th, a terrible hurricane called Milton is winding up to hit St. Petersburg and Tampa, which is already awash from the six-foot tidal surge delivered by Hurricane Helene in late September. Three hurricanes, including Helene, have lashed the Big Bend region of Florida’s panhandle in the last 18 months.
Hurricane Ian killed two people on Florida’s Sanibel Island in 2022 and cut the causeway to the island. Afterward, I called a friend who lived on the island to see how he was doing. Mike said he, his wife and his four-year-old daughter were safe and had been relocated far inland to temporary housing near the Everglades.
The front and back walls of their Sanibel condo had been breached by stormwater, allowing the storm surge to wash right through their home. Afterward, Mike and his wife recovered photos and boxes of their belongings strewn in the mangrove swamp behind their home. He said he was waiting for an insurance check and then would decide whether to rebuild or sell.
Wealthy people, like my old employers, the Kiplinger family, can afford to rebuild from repeated storms. After two hurricanes hit the Kiplinger estate in Stuart, Florida, they had paid to repair the dock and other damaged structures when I last visited in the 1990s.
Others cannot afford it. My grandfather lost a fortune in Miami Beach real estate in the 1920s. He’d built a Spanish-colonial-style apartment building during the land boom there. Tenants stopped coming after the killer Hurricane of 1927 severed the railway lines and bridges. My grandfather, who lived in New York, lost the property when he couldn’t repay the building loan.
Hurricanes are so frequent now that they’re pounding the property insurance business in Florida. For insurance to work, the insured event—fire, auto theft, windstorm—must be so predictably rare that the pool of funds collected from all the insured can meeting the occasional emergency. Billion-dollar storms are no longer rare. Some insurers are raising rates; others are quitting the state.
If home insurance becomes hard to get, how will new mortgages be written for home purchases? There are already stories in the paper of people having trouble selling their single-family homes in St. Petersburg. The Florida condo market is also stymied. Expensive repairs mandated by safety inspections are saddling many retired condo owners with assessments they cannot afford.
Florida’s explosive post-war population growth was fueled by three factors: mosquito control, interstate highways and air conditioning. Now, with an unsought fourth factor, frequent hurricanes, perhaps Florida is hitting its natural limit.
Interesting read on how new Florida legislation is impacting home insurance rates
https://www.bankrate.com/insurance/homeowners-insurance/florida-home-insurance-recovery/?tpt=b
Talk about approaching hurricane. I just lived through Milton now. We are safe with no damage of any kind to our home, which is miles away from water. We are in a no-flood zone, at a higher elevation. All that helped. However, rain and hurricane force winds were fierce. We lost power for 4 days and life is slowly returning back to normal now.
However, thousands of homes in many areas were severely damaged and recovery will be slow. Home insurance rates will certainly go up.
I was selfishly relieved when the rumor that my trusted plumber had retired to Florida turned out to be false: He told me that he is selling his property rather than building because of the enormous increase in property insurance rates, and that was six weeks ago. I’m sure they will be surging as well, like you said Greg.
I recall Wilma’, and Irma’. Many lost everything.
The state elevated lower levels of A1A(Overseas Hwy.) 3-5ft funded by federal funds between those two Hurricanes. The 114mile variation of bridging and keys roads needed Maintence.
This link is informative:
https://noaa.maps.arcgis.com/apps/MapSeries/index.html?appid=74157a10a9574fb4a4072c771778915d
For a commercial insurance system to operate successfully, collecting premiums and paying claims, it is all about the pool( in this case the group of homes) you want to insure. It has to be large in order for the losses to be predictable. The larger the better. You have to have years of data on past losses and premiums. AND, the pool as a whole cannot be catastrophically exposed.
Ideally, you could pool all the single family homes in the US, and spread the losses from storms in Florida across the pool. What happens instead is that some small companies that write policies in a single state that don’t include Florida risks can offer lower prices for their state, and the national companies cannot compete in that state. Without the profitable business from that state, premiums in Florida must be higher. And if enough companies do that in enough states, the Florida losses cannot be spread over enough non-storms states to continue to insure Florida homes in their country-wide pool.
State regulation is another problem. There are 50 different state regulator with 50 different sets of regulations. This is incredibly expensive. Regulation began in an effort to keep insurance companies solvent. Over time it has evolved into a process of trying to reduce or manage insurance company profits/processes. When a state becomes too difficult companies first respond by creating a separate company for that state. Then they have a pool for just that state, eventually stop issuing new policies, and withdraw, and the situation in Florida is what happens when that whole process matures. Florida, by itself, isn’t commercially insurable.
The same thing is happening in CA. Regulation became difficult, and companies like State Farm created pup companies that held only CA policies. CA continued trying to suppress rates, and now State Farm’s CA pup is impaired financially, not writing new policies and scrambling to raise premiums enough to survive.
Great explanation of how insurance works. I worked in the health insurance department of a large life insurance company many years ago and took several insurance classes. When I became a nurse, I understood why people with certain conditions at that time (80’s) were deemed uninsurable (inadequate pool to cover costs of catastrophic diagnosis). Fortunately, the health insurance industry has changed a lot due to government regulations, but so have the administrative costs – a whole other story.
I’ve been told that a large part of the insurance problem (both rates and companies leaving) is due to laws regarding replacement roofing.
My step-daughter and her family, who live in western North Carolina south of Asheville, stayed with us for a week. They live in an area that was inundated with rain, but did not experience river flooding. They returned home yesterday and have power, safe water, and internet connectivity has been restored. All of these services will be subject to interruption for the time-being, but they are safe.
I fear for the folks in Florida who are potentially getting a second hit. All the Helene-related storm debris can become missiles and floating battering rams during a storm like Hurricane Milton.
I know many folks that moved to Asheville NC from Florida to avoid hurricanes and costs. Not sure what their choices are today. Here in Michigan, we have avoided heavy snow the last few years. Is that a trend or a blip?
Less than 1% of the homes in Asheville’s Buncombe county have flood insurance. FEMA has received a lot of criticism but their task is daunting.
I would say it hit its natural limit some considerable time ago. Just as with North Carolina’s Outer Banks, there are some areas that should be left to nature.
I’m afraid a lot of people are going to be badly hurt financially and emotionally (let’s hope not physically) but Florida has been a disaster waiting to happen for some time. When water started seeping up onto the pavements in Miami was probably the time to get out.
Greg, I feel for the people of Florida. Here in Texas we’ve had big increases in home insurance rates recently, largely due to ever more frequent storms (including an historic ice storm), floods, wildfires, etc. But our situation pales in comparison to Florida’s.