The lede on this press release is in the "No Kidding" category — but the study it talks about gives some useful specifics about the cost of wind insurance along the Gulf Coast. Here’s the opening paragraph:
Many businesses along the Gulf of Mexico coast have had a difficult time obtaining wind insurance coverage since Hurricanes Katrina, Rita, and Wilma hit in 2005 and have often ended up paying more than twice as much for the insurance as they did previously, according to a RAND Corporation study issued today.
Actually, most of the press release after that point is pretty good. The reasons for higher property insurance In Florida, Mississippi, Louisiana and elsewhere won’t come as much of a surprise to the kind of folks who read this blog, but it’s interesting to look at the list as RAND sees it:
The study identified several reasons behind the large premium increases:
- Insurers and the modeling firms on which they rely increased estimates of the number of hurricanes expected to hit the region and the damage caused by hurricanes when they do occur.
- Financial rating agencies tightened capital adequacy requirements for insurers.
- Litigation and government actions following the 2005 hurricane season led to uncertainty about how insurance contracts will be enforced by courts in the region.
- The threat of large assessments on insurers after future hurricanes that caused deficits in residual markets.
That third reason is one you can’t underestimate. By the way, here’s a link to the study itself.