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Florida hasn't been hit by a hurricane in six years, but a long"hurricane tail" continues to lash the insurance industry, a newreport shows. The 2011 storm season, which ended Nov. 30, continued the longeststretch without a hurricane in Florida since the nine-year gapbetween Opal (1995) and Charley (2004). The last hurricane to hit the Sunshine State was Wilma, which firststruck the southwest peninsula as a Category 3 storm in October2005. So why aren t property insurance rates dying down like the winds? "Because insurers know the cycle won t last, and that the costsassociated with a hurricane s long tail require building up thereserves to pay those damages," said the Insurance InformationInstitute. In other words, III says, "While major storms last for hours,dealing with costs happens years in advance." Property insurers say they're still recovering from the eightstorms that slammed into Florida in 2004 and 2005. Statewide, the industry's average return on net worth for propertyinsurance dropped 183.3 percent in 2004, followed by a 53.4 percentdecline in 2005, III reported. Insurance companies have been operating in the red in Floridasince Hurricane Andrew in 1992, said Lynne McChristian, Floridarepresentative for the institute. Unlike the state-run Citizens Property Insurance and FloridaHurricane Catastrophe Fund, private insurers do not borrow moneyafter a hurricane to pay claims. Insurance regulations requireprivate insurers to have money on hand, in advance, to pay formajor storms. III says that regular premiums collected in any given year aretypically sufficient to cover damages sustained by one property ata time, such as house fires or bursting water pipes. But they areinsufficient to pay the enormous volume of claims resulting fromnatural disasters, such as hurricanes and earthquakes. To pay these costs, insurers use historical data to factor in acatastrophe s long tail to smooth out rates over the years andbuild the necessary reserves. During the past summer, state regulators approved 32 home insurancerate increases ranging from 6 to 34 percent. Historically, Florida s average return on net worth for propertyinsurance is well below the national average. In storm-free years,the rate of return outpaces the nation, yet the bottom drops outwith powerful storms that can wipe out years of cash reserves in asingle day. From 2000 to 2009, the U.S. rate of return on net worth was 4.7percent for homeowners insurers; Florida s rate of return on networth for the same time period was 0.5 percent. To say that Florida is a challenging market for insurers iscertainly an understatement," McChristian said. "Profitability is subjected to both high winds and legislativewhims, and when some private insurance companies felt they couldnot appropriately price insurance policies to deal with the vastvolatility, they retreated from the market. In recent years, private insurers, including State Farm, havedropped hundreds of thousands of homeowner policies, most of whichwere picked up by the state-backed Citizens. Other coastal states have had their return on net worth impacted inthe past decade by major storms as well, most recently HurricaneKatrina, which devastated Louisiana and other Gulf Coast states. Southeast Atlantic states to Florida s north, however, includingthe Carolinas, were only lightly impacted by tropical eventsbetween 2000 and 2009, contributing to higher profits in theregion. Florida s hurricane history translates into a 46 percent chancethat one will strike each year, according to a report on hurricanefrequency and damage costs by the Florida State University StormRisk Management Center. The e-commerce company in China offers quality products such as Fluorescent Tube LED Replacement , LED Under Cabinet Light Fixtures Manufacturer, and more. For more , please visit Fluorescent Tube LED Replacement today!
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