Saturday, August 30, 2008

Coastal Insurance Markets Improving, State Insurance Chief Says


Living along the coast we are constantly concerned about Hurricanes, heavy rains, afternoon thunder squalls with 60 mph winds, lighting, and many other disasters that nature throws at us. The last few years we have had some very severe hurricanes make landfall in heavily populated areas, most notably, Hurricane Katrina that nearly destroyed New Orleans and surrounding communities. Some of the smaller communities still have not rebuilt. Florida felt the wrath of three different hurricanes in one season. Some people are still fighting with their insurance companies, or were sadly made aware that the insurance they had was not satisfactory to rebuilding their home or business. We all pay insurance and expect that one day when we need it the insurance company will be there to help us. Unfortunately we forget that insurance companies are in the business of making money and they don’t like to pay out, and will fight tooth and nail to payout. It’s like the TV commercial that depicts a guy checking his insurance policy and finding out the insurance only covers if a ficus tree were to fall on his car.

We have been very lucky living on Hilton Head. The last hurricane to come through here was Hurricane David in 1979 and it was barely a Category 1 storm. However the insurance companies have penalized us because of their losses in other areas. Our insurance rates have tripled over the past few years. We have to carry flood insurance and wind and hail. The wind and hail insurance is what has gone up dramatically.

As a local Realtor selling resort & residential properties it has not been a good thing. Regime fees for condominiums has risen dramatically primarily due to insurance rates. Insurance companies realized that the condominium market was not a good market. There are numerous companies that will not even issue insurance. The state of South Carolina has tried to improve this situation and passed some laws two years ago to address the problems.
It was good news to see that we may have a chance to see our rates come down, as indicated in the article from the island Packet below. copyright@ charlie b fraser

by Charlie B Fraser

By JIM FABERjfaber@islandpacket.com843-706-8137
Published Friday, August 29, 2008The coastal insurance market has loosened up in the past two years as more companies write policies here and prices on some coverage has fallen, insurance experts told a crowd of homebuilders and real estate professionals on Hilton Head Island on Thursday night. State Insurance Commissioner Scott Richardson, a former state senator from the island, said 12 new insurance companies have entered the state since he took over as commissioner in 2007. Another three are expected to enter in the next 90 days, he said.
Insurance prices for condominium buildings have fallen as much as 50 to 60 percent along the coast in that time, Richardson said. But that trend could come to a crashing halt if a powerful storm makes landfall this year -- a storm like Tropical Storm Gustav might become.
"We are rated (for cost) based on our (state) experience," Richardson said, "but don't think the big picture isn't part of it."

That means a significant strike anywhere would bring higher rates here, especially through increases in the cost of reinsurance -- insurance for insurance companies. "If Gustav gets all whipped up and hits Louisiana for another $40 billion, don't think your condo premiums aren't going up, because they are," Richardson said. But, barring Gustav or Hanna, which formed in the Atlantic on Thursday, storming ashore, things are getting better for coastal homeowners, although prices aren't likely to return to pre-Katrina levels.

For one thing, insurance companies have modernized in the past decade so they know exactly what and where they are insuring. In the 1990s, Peter Sparks, one of the panelists and a professor emeritus of civil engineering at Clemson University, worked with an insurance company that thought it was grossly overexposed in a single Miami zip code. It turned out that zip code was a bank of post office boxes. The insurance company didn't even know where all the insured property was, Sparks said. Today, that lack of basic knowledge is long gone, he said.
When asked the best way to hurricane-proof a home, Sparks offered some pragmatic advice.
"The best thing I can tell you in terms of mitigation is move inland," Sparks said to the crowd at the Country Club of Hilton Head. For those unwilling to forego ocean views, Sparks urged sealing up the exterior of the home with improved windows, doors, shutters, shingles and the like. Those improvements are among the most affordable and effective, he said. They also can earn savings on insurance premiums.

In terms of new insurers doing business in South Carolina, they're needed because some of the biggest insurers in the state still aren't writing policies in coastal areas, said Bill Fuge, property and casualty manager of Kinghorn Insurance Services' Hilton Head office. " Allstate has not written a new piece of business in two years (in Bluffton)," Fuge said. "They feel it's too close to the coast." Allstate isn't alone in that decision. Many of the brand-name insurance carriers have stopped writing wind and hail coverage in Bluffton, something that used to be automatic, Fuge said. But, some of the newer companies like Universal Insurance Holdings are writing coverage for wind and hail damage at "phenomenal rates," Fuge said.

Although insurance costs can surprise some potential real estate buyers here, it isn't stopping individual sales. "I can't specifically say I've seen the cost of insurance kill a deal," said Gerry Prud'homme, a broker with Carolina Realty Group and a panelist.

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