Florida home insurers are nervously watching Hurricane Frances. Their resources are already strained by the $7 billion in damage caused by Charley. The industry is not ruling out higher premiums to cover their losses.
About $1 billion in cash to pay Charley’s claims will come from the state’s catastrophe fund. Even after that payment, Tami Torres of the State Department of Financial Services says the state says the fund will remain solvent.
“The key is, is that there is five billion dollars of cash on hand to help pay for claims. That also means that the companies have access to issuing bonds to help pay for claims as well."
There’s general agreement that the Florida insurance market is in better shape than it was before Hurricane Andrew, but Charley did about $7 billion worth of damage, and there are now questions about how much more the market can absorb before the rate increases.
Theoretically, the state’s insurance companies have reserves to pay for a storm causing $32 billion in damages, but Charley has already cut into the reserves, lowering what the industry can handle.
If Frances causes even $11 billion in damage, the state fund would be dry and it would have to sell bonds, triggering at least a two percent assessment on every policy written in Florida.
Jeff Grandy of the Florida Association of Insurance Agents tells NewsChannel Seven after Charley the insurance industry is already reassessing the rates it currently charges.
"I believe that the carriers will have to assess where they are, and what their exposures here are in Florida. A lot of folks before Charley thought that Orlando was inland, and we’ve quickly found out that there are no inland places in Florida."
With one storm down, another on its way and 90 days left in hurricane season, the insurance industry is nervous.
The insurance industry says if Frances causes any significant damage, just getting an adjuster to your house and getting payments for repairs could be slower due to the shear volume of work put on adjusters.
One way to avoid damages is to be prepared. To find out what you can do to help protect your home, log on to www.flash.org.