Cost of Katrina - insurance perspective

Standard commercial and residential policies issued by private insurers cover wind damage, but flood is excluded.

<snip>

Katrina's eye passed to the east of New Orleans on the morning of Aug. 29, and there was little time to assess wind damage before the levees broke and flooding began.

Distinguishing the portion of damage attributable to wind or flood will be difficult in many areas that were impacted by winds in excess of 100 mph.

NAMIC Online News Coverage

FEMA Provides Flood Recovery Guidance to Coastal Parishes of Louisiana to Support Rebuilding Efforts

(4/12/2006) - To help Louisiana coastal communities make prudent rebuilding decisions during the hurricane Katrina and Rita recovery process, the Federal Emergency Management Agency (FEMA) released flood recovery guidance documents for Jefferson, Orleans and St. Bernard parishes as well as portions of Plaquemines and St. Charles parishes in southern Louisiana.

Colorado State University Forecast Team Continues to Predict Another Very Active Hurricane Season for 2006

(4/5/2006) - On Tuesday, April 4, the Colorado State University forecast team maintained its earlier prediction for the 2006 hurricane season. The U.S. Atlantic basin will likely experience another very active season, but most likely with fewer landfalling intense hurricanes than in 2005 - the costliest, most destructive hurricane season ever.

Louisiana: Corps of Engineers Recommends Raising Levees in Local Parishes

(4/4/2006) - Some sections of levee in the New Orleans area require little or no height adjustments, while other sections must be raised by as much as eight feet to satisfy the Army Corps of Engineers that the structures will withstand the next hurricane of the century, a corps official reported to the state's flood protection panel Monday.


Louisiana: Legislators Return for Regular Session

(4/3/2006) - Louisiana legislators returned last week for the 85-day regular legislative session, and insurance bills related to hurricanes Rita and Katrina are anticipated.

University of Mississippi to Host Insurance Symposium in April to Focus on Challenges of Catastrophes

(3/29/2006) - Catastrophe, challenge and change are issues slated for discussion during the 11th annual Insurance Symposium April 18-19 at the University of Mississippi.

Ruling by Federal Judge Suggests Flood Exclusion is Valid and Enforceable

(3/29/2006) - The American Insurance Association (AIA), NAMIC, and the Property Casualty Insurers Association of America (PCI) have issued the following statement in response to a recent ruling by the U.S. District Court for the Southern District of Mississippi denying a motion by Allstate Insurance Company to dismiss a lawsuit concerning the cause of damage to a home resulting from Hurricane Katrina.

Texas: Governor Issues Executive Order on Hurricane Evacuation Procedures

(3/28/2006) - Gov. Rick Perry issued an executive order on March 21 that implements most of the recommendations of the Task Force on Evacuation Transportation and Logistics.


Louisiana: Commissioner Works to Help Secure Bond Funds for Policyholders

(3/27/2006) - Commissioner of Insurance Jim Donelon met with the nation's largest bond insurers and bond rating agencies in New York earlier this month in a continued effort to help with Louisiana's recovery efforts following Hurricanes Katrina and Rita.

New Model Predicts U.S. Hurricane Activity Rates to Increase Losses by 40 Percent in Florida and Gulf Coast

(3/23/2006) - Risk Management Solutions (RMS) announced on Thursday that increases to hurricane landfall frequencies in the company's U.S. hurricane model will increase modeled annualized insurance losses by 40 percent on average across the Gulf Coast, Florida, and the Southeast.

Federal Judge Remands Mississippi Attorney General's Hurricane Katrina Lawsuit Back to State Court; NAMIC Comments

(3/10/2006) - The U.S. District Court for the Southern District of Mississippi has granted a motion to remand to state court the action brought by Mississippi Attorney General Jim Hood against several insurers regarding coverage for damage resulting from Hurricane Katrina.

Previous Coverage

* Louisiana: Commissioner Issues Two Hurricane-Related Directives (3/6/2006)
* Florida: Hurricane Task Force Releases Its Final Report (3/6/2006)
* Bill Suggested to Halt Fraud in Sale of Katrina-Damaged Cars (3/3/2006)
* U.S. Storm Damage Predicters See Bigger Risks Ahead (3/1/2006)
* The Brookings Institution Releases Policy Brief on Preparing for Future ?'Katrinas' (2/28/2006)
* Florida: Hurricane-Related Reports Likely to Affect Legislative Policy Decisions (2/6/2006)
* Mississippi: Clarifying Bulletins on Hurricane Katrina Claims, Extensions of Coverage (2/6/2006)
* Louisiana: Change, Progress and Challenges Continue After Katrina (2/6/2006)
* Florida: Hurricane Task Force Fails to Finish Work; Schedules Final Meeting for Feb. 27-28 (2/2/2006)
* Report: Nearly 70 Percent of Homeowners Claims from Hurricane Katrina Have Been Settled in Louisiana and Mississippi (2/2/2006)
* From A to Z (1/30/2006)
* Agencies Serve Customers - Even When Disaster Strikes (1/30/2006)
* Mississippi: Department Issues Clarifying Bulletins on Hurricane Katrina Claims, Extensions of Coverage (1/30/2006)
* Texas: Allstate Gets Reprieve in Rita Expenses Case; NAMIC Comments (1/27/2006)
* White House Fact Sheet: Protecting New Orleans From Future Flooding (1/16/2006)
* Reforms Needed to Prepare for Major Catastrophes, Insurance CEOs Tell Forum (1/12/2006)
* Record Homeowners Insurance Claim Payments from 2005 Hurricanes Surpasses Years of Mississippi, Louisiana Homeowners Premiums (1/11/2006)
* Florida: Governor, Lt. Governor Announce Funding Recommendations for Hurricane Preparedness, Response and Recovery (1/9/2006)
* Hurricane Katrina and Tort Reform Highlight 50 Most Visited News Stories in 2005 (1/4/2006)
* Louisiana Commissioner of Insurance Unveils Hurricane Mediation Program (12/28/2005)
* Mississippi: Commissioner Establishes Mediation Program for Hurricane Katrina Victims; NAMIC Comments (12/22/2005)
* Swiss Re Estimates Record $80 Billion in Insured Losses During 2005 (12/21/2005)
* And Wilma Makes Three (12/9/2005)
* After Accurate 2003-2005 Forecasts, Forecasters Predict Active Atlantic Hurricane Season in 2006 (12/7/2005)
* Report: Property/Casualty Insurers Rxpected to Pay Wilma Victims $6.1 Billion (11/29/2005)
* Mississippi: Farm Bureau To Shift Customers Between Subsidiaries Following Hurricane Katrina; NAMIC Comments (11/28/2005)
* NAMIC Addresses Issues Stemming From Recent Hurricanes (11/21/2005)
* Arkansas: Insurers Reminded of Water Damaged Vehicles Requirements and Rural Risk Underwriting Assessments (11/21/2005)
* NAMIC Member Companies Donate Nearly $1.4 Million to Victims of Hurricane Katrina (11/15/2005)
* Florida: Citizen's Projects 11 Percent Assessment for 2005 Hurricane Losses; NAMIC Comments (11/9/2005)
* NAMIC Commends Chairman Shuster for Holding Hearings on Legislative Proposals in Response to Hurricane Katrina (11/8/2005)
* Florida: Regulators Issue Memorandum on Hurricane Wilma Reporting (11/7/2005)
* Overcome: My journey from Houston to New Orleans in the trails of Katrina and Rita (11/7/2005)
* Insurers to Pay Hurricane Rita's Victims $4.7 Billion for Insured Property Losses, Says ISO's Property Claim Services (11/4/2005)
* RMS Increases U.S. Insured Loss for Hurricane Wilma Estimate to $8 - $12 Billion (10/28/2005)
* FEMA to Receive Assistance for Unprecedented Flood Claims (10/28/2005)
* IBHS Offers Tips to Help Home and Business Owners Begin Recovery After Hurricane Wilma (10/25/2005)
* Mississippi: Commissioner Plans Bulletin to Extend Deadline for Filing Hurricane Katrina Claims (10/24/2005)
* Louisiana: Cameron Parish to Implement Grid System for Adjusting Claims (10/24/2005)
* EQECAT Issues Preliminary Estimates of Hurricane Wilma Insured Losses at $2 to $5 Billion (10/24/2005)
* Florida: Lawmakers Probe Citizens Property Insurance Corporation Allegations (10/24/2005)
* National Flood Insurance Program Not Actuarially Sound, Says GAO Report (10/21/2005)
* Homeland Security Urges Preparedness And Continues Preparations As Hurricane Wilma Strengthens (10/20/2005)
* NICB Launches Free Service to Help Protect Consumers From Buying Flood-Damaged Vehicles (10/19/2005)
* U.S. Rep. Robert W. Ney Continues Examination of National Flood Insurance Program (10/19/2005)
* U.S. House of Representatives Overwhelmingly Approves Three Hurricane Housing Relief Bills (10/17/2005)
* Louisiana: Gov. Blanco Calls Special Session (10/14/2005)
* Property/Casualty Insurance: Providing the Foundation of Economic Recovery (10/12/2005)
* Recovery, Redevelopment Efforts Proceed in St. Bernard, Plaquemines Parishes (10/10/2005)
* American Arbitration Association Responds to Gulf Coast Tragedy with New Program To Manage Dispute Resolution Following Disasters (10/10/2005)
* ISO Property Claim Services Preliminary Estimate Puts Insured Losses From Hurricane Katrina at $34.4 Billion (10/6/2005)
* Louisiana Agriculture and Forestry Losses for Hurricane Rita to Top $472 Million (10/6/2005)
* Mississippi: Special Legislative Session Dealing With Host of Post-Hurricane Katrina Issues; NAMIC Comments (9/30/2005)
* Arkansas: Displaced Insurance Producers Granted Waivers (9/27/2005)
* Hurricane Rita Estimated to Cost the Insurance Industry Between $2.5 Billion and $5 Billion (9/26/2005)
* NAMIC to Participate in New Orleans Coordinated Claims Centers Planning (9/26/2005)
* Claims Phone Numbers and Websites for NAMIC's Texas Insurers (9/23/2005)
* Final Louisiana Emergency Rules Issued (9/22/2005)
* Insurance Departments Agree To Coordinated Hurricane Katrina Data Reporting Requirements; NAMIC Comments (9/22/2005)
* Public Policy Issues to Highlight NAMIC 110th NAMIC Convention (9/22/2005)
* U.S. Lawmakers Mull Natural Disaster Insurance (9/21/2005)
* Rita, Now Category 4, Heads for Gulf Coast (9/21/2005)
* National Flood Insurance Program Announces Simplified Adjustment Process For Policyholders Affected By Hurricane Katrina (9/21/2005)
* NAMIC Statement on Mississippi Litigation Against the Property/Casualty Insurance Industry Since ?'Katrina' (9/16/2005)
* Mississippi: Commissioner Appears To ?'Clarify' Position on Flood Payouts; NAMIC Comments (9/15/2005)
* Senate Finance Committee Issues Emergency Tax Relieft for Hurricane Katrina Victims (9/14/2005)
* Alabama: Commissioner Releases Two Bulletins in Aftermath of Hurricane Katrina (9/12/2005)
* Mississippi: Commissioner Issues Bulletin on Hurricane Katrina (9/12/2005)
* Regulators Develop Database to Help Consumers Affected by Hurricane Katrina (9/12/2005)
* New Orleans Flood to Contribute to Increased Estimated Insured Losses to $40-$60 Billion (9/9/2005)
* Louisiana Insurance Commissioner Holds Meeting on Hurricane Katrina Aftermath (9/8/2005)
* Florida Insurance Commissioner Calls for Natural Catastrophe Fund, Tax-Deferred Catastrophe Reserves (9/7/2005)
* Regulators Urge Insurers to Grant Grace Periods to Hurricane Katrina Victims (9/6/2005)
* Treasury Secretary Holds Press Conference on the Economic Effects of Hurricane Katrina (9/6/2005)
* Impact of Hurricane Katrina on National Economy Likely to Be Limited (9/2/2005)
* Mutual Insurers Respond (9/2/2005)
* A.M. Best Comments on the Impact of Hurricane Katrina on the Property/Casualty Industry (9/2/2005)
* NAMIC Establishes Relief Fund for Victims of Katrina (9/2/2005)
* FEMA Warns People to be Careful When Hiring Contractors For Disaster Repairs (9/1/2005)
* Insurance Advice Offered For Hurricane Katrina Damage Recovery (8/31/2005)
* Hurricane Katrina Projected to be the Most Costly Natural Catastrophe in U.S. History (8/31/2005)
* Insurers Set Up Special Toll-Free Numbers to Assist Policyholders with Hurricane Katrina Related Claims (8/31/2005)
* Louisiana Department of Insurance Issues Very Early Damage Estimates (8/30/2005)
* Post-Landfall Estimates of Insured Losses From Hurricane Katrina on Gulf Coast Could Approach $16 Billion (8/29/2005)
* Hurricane Katrina Leaves Four Dead in Florida (8/26/2005)
* South Florida Residents Brace for Hurricane Katrina (8/25/2005)
* NOAA Raises the 2005 Atlantic Hurricane Outlook (8/5/2005)
* Hurricane Dennis Damages Estimated to be Less Than $1 Billion (8/3/2005)
* Hurricane Dennis Insured Losses Under a Billion According to Estimates (7/26/2005)
* Florida: Commissioner Issues Order Prohibiting Cancellations, Non-Renewals on Properties Damaged by Hurricane Dennis (7/21/2005)
* Hurricane Dennis Sweeps Through Florida Panhandle, Alabama Coast; Not As Damaging As Ivan (7/11/2005)
* Florida: Lawmakers Approve Hurricane Legislation Package Within Hours of Adjournment (5/9/2005)

Industry News Coverage

Bush Approves Notes for Hurricane Flood Insurance (Oct. 12)

Auto Dealer Group Says More Than 250,000 Flooded Vehicles Could Hit the Market (The Repository, Oct. 7)

Mississippi Sues Insurers Over Flooding Exclusions (The Washington Post, Sept. 16)

Insurance Industry Opens Hurricane Insurance Information Center (Insurance Information Institute, Sept. 15)

Congress Boosts Flood Program Borrowing to Cope with Katrina Claims (Insurance Journal, Sept. 14)

Katrina May Change Face of Insurance - GE Exec (Reuters, Sept. 13)

Bush Signs $51.8 Billion Measure for Hurricane Katrina Recovery (Bloomberg, Sept. 9)

Hurricane Katrina: Insurance Claims - an interview with Carolyn Gorman, vice president, Insurance Information Institute (Washington Post, Sept. 7)

State Farm Already Faces More Than 100,000 Claims From Katrina (Baton Rouge Advocate, Sept. 7)

Hurricane Katrina Aid Bill $2.8 Billion So Far, as 32,000 Rescued, Troops Arrive (Forbes.com, Sept. 7)

Louisiana: Insurance Commissioner Hosts Summit (New Orleans Times-Picayune, Sept. 6)

Tropical Meteorology Project Predicts Above-Average Activity for September and October (Sept. 2)

Katrina Auto Insurance Losses Likely Big - Report (Sept. 1)

Brace now for wind insurance rate hike

By GAIL LIBERMAN, Special to the Daily News

Sunday, June 11, 2006

By the time Citizens Property Insurance begins phasing in its whopping windstorm insurance increase in March 2007, some say surplus lines insurance could be cheaper.

By then, however, you might not find surplus lines windstorm coverage. Surplus lines companies insure property with more unique risk, often at negotiated rates. You may already have surplus lines coverage on your 10-carat diamond ring, yacht or art collection.

Be aware that by the time you really need windstorm coverage to protect your home or condo against hurricanes, surplus lines windstorm coverage could dry up. That could happen as soon as next March, when Citizens windstorm rates are due to skyrocket, says Gary Pullen, executive director for the Florida Surplus Lines Service Office.

Surplus lines coverage is intended to be a market of last resort. It is prohibited from competing with traditional insurance companies, known as "admitted insurers," which the state more strongly regulates.

To be approved as a surplus lines insurer, a company must submit a request to Pullen's Florida Surplus Lines Service Office, a nonprofit agency created under state law. The state's Office of Insurance Regulation reviews its financial statements. You typically can obtain surplus lines coverage through an insurance agent, Pullen says.

Chief drawbacks of surplus lines insurance:

• Surplus lines providers are not subject to Florida contract or rate regulation.

• Surplus lines insurers are not covered by the state guarantee fund. If your surplus lines insurer goes belly up, you're out of luck. That's why the company's financial strength is critical.

Pullen says surplus lines coverage availability constantly changes and is limited by region. Once a company has written all its "capacity" for an area, it stops. Capacity is apt to dry up further, he believes, as reinsurers ?- companies paid to insure part of an insurance company's risk ?- become scarcer.

"Since the beginning of the year, there has been a constriction of the amount of (windstorm) coverage available in the surplus lines market," Pullen said. "Most is being driven by the reinsurance market. A number of those contracts came up on June 1. A number are not renewed or are done so at less capacity."

Reinsurance costs up heading into hurricane season
Sat Jun 17, 2006 10:56 AM GMT9

By Ed Leefeldt

NEW YORK (Reuters) - As the United States heads into hurricane season, an ill wind is blowing somebody good -- the Bermuda companies that provide U.S. insurers with backup coverage.

The leading Bermuda reinsurers, who take on risk that insurers are looking to offload, have seen profits go up 21 percent in the first quarter, according to a study by British insurance broker Benfield Inc.

Things will get even better for the reinsurers when many insurers that provide auto, home and business coverage along the U.S. Atlantic Coast come to market July 1 to renew their contracts for the next year after last year's brutal hurricane season.

"Prices are pretty steep right now and there's not a lot of capacity," said Justin Fuller, a reinsurance analyst with Morningstar.

and Hannover Re in terms of size.

Benfield predicts that there will be further price increases going into 2007. Right now reinsurance is scarce and expensive in the Florida market, which has been hit by six hurricanes in two years, and also for offshore energy platforms, where rates have risen as much as 300 percent.

But those prices could spill over into other areas as well, Benfield predicts. "The strength and sustainability of this trend will be determined by the severity of the 2006 hurricane season," the report states, noting that this year is expected to have "an above average hurricane season."

The Benfield report also said reinsurers are being more selective in the risks they take.

While net income of Bermuda reinsurers rose 21 percent to $2.3 billion in the first quarter, premiums written decreased 5 percent to $16.5 billion, the first decrease in first-quarter premium volume since 2001.

Benfield attributed the revenue reductions to more disciplined underwriting by the reinsurers, who are only taking on the risks they want -- the safest and the best paying. Reinsurers are also letting regular insurance companies take more exposure in the first stages of a disaster.

Natural disaster insurance: Can you get it?
published: Saturday | June 10, 2006

Cedric E. Stephens, Contributor


Exposed seaside locations such as this promontory in Grenada may find it more difficult to get hurricane insurance coverage in future. - Norman Grindley/ Deputy Chief Photographer

BUSINESSES THAT operate in coastal areas, and persons who have houses there, face higher insurance prices for coverage against natural disasters like hurricanes, floods and earthquakes. This is the good news. The bad news is that insurers who offer this type of coverage may soon begin shedding risks in these zones, forcing the owners to self-insure.

Developments now taking place in the global insurance and reinsurance markets, the Gulf States, Florida, and in the coastal regions of the eastern seaboard of the U.S.A. ­ from the State of Georgia to New York ­ suggest that it is not a question of if, but when these trends will spread to Jamaica and the other Caribbean islands.

One view is that the culprit is Hurricane Katrina. That hurricane caused US$60 billion in insurance claims during 2005. Actually, 'Katrina' and the other hurricanes last year provide only part of the explanation. Raffique Shaw, writing in The Trinidad & Tobago Express on February 9, 2005, warned that "billions of dollars worth of sea-front properties may soon become uninsurable or, if they are insured, the cost could become prohibitive."

He reported that insurers in Trinidad had declined to comment on the suggestion that the world's largest reinsurers (Munich Re) were "re-examining its coverage of properties within 300 metres of the shoreline in disaster-prone countries." Months before 'Katrina' created the largest insurance loss, Mr. Shaw drew attention to the potential impact for 'East Coast USA' and the Caribbean if reinsurers imposed restrictions based on the proximity of property to the shoreline. Global weather-related losses during 2003-4 especially in coastal areas were cited as the trigger for the measures.

In its April 26, 2006 issue USA Today said that in Florida alone, "insurers that are undercapitalised or fearful of losses" have notified the state of plans to cancel more than 500,000 policies before the start of the 2006 hurricane season. That state, which has an estimated US$2 trillion of coastal properties and a population of some 13 million persons living in those areas, is described by insurers as "the nation's most challenging property insurance market." Other sources say that buyers lucky enough to still have coverage are seeing price increases of 50 to 100 per cent.

The National Association of Insurance Commissioners, state officials who regulate the property insurance industry, adopted at a quarterly meeting here a resolution proposing a Federal Natural Catastrophe Preparedness Commission.

Among the proposals the regulators want the panel to consider: a national catastrophe fund to backstop private insurance companies to encourage them to stay in the market.

The resolution comes in the wake of nearly $60 billion in hurricane-related property insurance losses last year. The first named storm of the 2006 hurricane season, Alberto, is expected to hit Florida's Gulf Coast today.

Alarmed by their recent hurricane losses and forecasts of more powerful storms, insurance companies are refusing to renew hundreds of thousands of coastal homeowners' policies in Florida, Texas, New York, Massachusetts and other states.

Insurance premiums for windstorm insurance coverage in many coastal areas have skyrocketed.

improve hurricane preparedness.

Florida's state-run insurance company, which sells policies to homeowners when they can't get coverage in the private market, is expected to become the state's biggest property insurer. That's because private companies have dropped so many policies.

Because of the huge storm losses last year, private insurance companies are also paying more for reinsurance, the insurance they buy to protect themselves from unexpectedly high claims.

And it's harder to get. Demand for reinsurance far exceeds supply, Bradley Kading, the president of a trade association representing reinsurers, told an NAIC committee on Monday. Laws regulating building codes, storm preparedness and insurance coverage vary by state. Among the issues the NAIC wants the proposed commission to consider:

• Incentives for states to adopt stronger building codes that would make buildings more resistant to disaster damage.

• Incentives for property owners to retrofit existing homes and buildings to harden them against storms and earthquakes.

• Allowing private insurers nationwide to accumulate reserves tax-deferred so they have sufficient cash for insurance claims after a disaster.

That danger is growing as insurance companies continue to cancel numerous policies and raise premiums on many others following last year's hurricanes, which left them battered with heavy claims in Florida and the Gulf Coast states.

The impact is being felt by thousands of South Florida commercial property owners whose policies are scheduled to renew on July 1, one of the heaviest renewal dates, but whose insurance companies have not yet confirmed they will retain coverage.

"This is an absolute circus," said Thomas Washburn, president of Pinecrest-based insurance agency Wilson, Washburn & Forster.

Many insurance companies have delayed offering renewals because they have still not negotiated contracts with companies from which they buy reinsurance, Washburn said.

That system enables insurance companies to share their claims and losses with reinsurers, many of whom are based in Bermuda or Europe. Regulators and rating agencies require insurance companies to have specific percentages of reinsurance coverage for the total amount of property they insure.

The amount of non-renewals has grown this spring because lack of reinsurance is forcing many insurers to reduce their volume of business in Florida, Washburn said.

Many of those cuts are coming in property sales, where an insurance company covered the seller, but will not take on the buyer, according to Washburn and Huerta.

Tamach's biggest hit in the wallet is at a warehouse near Miami International Airport. Tamach hoped its annual property insurance premium would remain similar to the seller's $250,000.

But Zurich International, the seller's insurance company, declined to offer a policy to Tamach, Huerta said.

That forced Tamach to shop for a new policy, which it found for a $1.1 million premium from Boston-based Aspen Specialty Insurance.