Buckle up, batten down the hatches, brace yourself, hurricane season started on 1st June and blows all the way through until the end of November. The geographical range is vast too, with insurers applying a separate hurricane deductible for properties in every coastal state from Maine to Texas.
What can we expect?
According to a report by CoreLogic nearly 7 million homes along the Gulf and Atlantic coasts are vulnerable to hurricane damage this year. The numbers are staggering, if all these houses needed to be rebuilt the costs would reach about $1.6 trillion. About $1 trillion of this would be on the Atlantic Coast, an increase of $40 billion over last year. Meanwhile the Gulf Coast would see an increase of $16 billion with total costs estimated at over $600 billion.
If there is any good news, the modelling tools predict that this season should see ‘normal’ activity. However, it will come as little comfort to the residents of the states at most risk – Florida, Louisiana and Texas – that they can expect between 10 and 16 named storms.
Remember last year?
2017 is hard to forget and for good reason, it was the costliest season in history. Harvey, Irma and Maria blew in causing over $250 billion in damages. The losses were so extensive that many of the claims are still yet to be paid.
Costliest Hurricanes in the U.S.A:
Katrina (2005) – $160B
Harvey (2017) – $125B
Maria (2017) – $90B
Sandy (2012) – $70B
Irma (2017) – $50B
Aside from flooding, wind damage is a major cause of loss. It can also lead to further losses such as ingress of water, through a damaged roof. There is the added complexity that wind is excluded from homeowner policies in some coastal areas and those cases must be insured separately. Sometimes this is only available from a state-run insurer of last resort, so the options are very limited.
The local U.S markets can be fraught with gaps and pitfalls. For example where hurricane Harvey hit hardest it was estimated that 80% of properties were uninsured. Also, there are genuine fears that local markets like those in Florida may not withstand a major hurricane. The main national carriers exited Florida after heavy losses and it is now left to one state insurer and dozens of small local insurers to pick up the risk – many of whom are believed to be undercapitalised.
The value of Hurricane cover
The insurer, FM Global has just published the results of a study on the value of Hurricane protection. They tracked 1800 commercial clients over a 10-year period and found that for every dollar invested on hurricane protection, the client would prevent US$105 in losses and disruption. This was based on an estimate of some 10,000 wind and flood losses.
Access to the London Market could give homeowners another option
It has been shown by the FM global research that there is a tangible value in adequate hurricane cover. Yet in the USA many of the homeowners who need this help could do with more options – or in some cases any option at all.
How can we help the high net worth homeowners? Distressed risks can be assessed rather than simply dismissed under a blanket underwriting approach by a large local carrier. An agile approach coupled with solid, risk-based underwriting could see business come to London that could otherwise be overlooked.
There is also the question of how robust local markets really are. Whereas in London markets have to be properly and satisfactorily funded, well placed and knowledgeable enough to underwrite hurricane risks that are being missed locally. I believe this is where the niche nature of the London market comes into play.
Eddie Walter, North American Property Broker
If you would like to find out more about how Shepherd Compello can help you with High Value Homeowner’s insurance, please contact Eddie on +44 (0) 20 7378 4000 or email: email@example.com
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