Hurricane Impact Remains A Question: E&S Exec
By Susanne Sclafane
NU Online News Service, Sept. 22, 3:27 p.m. EDT, Orlando, Fla.?The impact of recent hurricanes on the excess and surplus lines market and on insurance consumers hinges on the answer to two key questions, according to a surplus lines executive.[@@]
William McCord, senior vice president and director-personal lines for Burns & Wilcox in Farmington Hills, Mich., said that while his markets have only seen 5,000 claims so far?and a competing MGA in the Southeast reports a similar figure?the impact on rates going forward really depends on how badly the state run pool, the Citizens Property Insurance Corporation, has been hit.
While property rates have been falling, and while the most likely pricing impact of Charley, Frances and Ivan will be a plateau, there have been reports that the claims total will exceed the cap that Citizen's has.
"If that's true, that definitely could impact the [surplus lines] market, because the facility has been a real competitor to people like us." Citizen's pricing has been way below the levels of major E&S insurers, he said, naming several surplus lines markets that Burns & Wilcox represents.
"That's great if you're a customer in Florida?you've got a less expensive option. But on the other hand, if that option goes away, you've got some sticker shock because the price [will go] up 30 or 40 percent."
Mr. McCord also said that there may be some instances of some underreporting of claims by Florida insureds. "The big issue is the double deductible," he said, explaining the reason for such underreporting.
If Charley went through and damaged your property, and then Frances comes through and does more damage, that's two events, he said, noting that an insured with a $200,000 house and a 5 percent deductible might not have the ability to pay $10,000 for the first hit and then another $10,000 three weeks later.
"So as long as we're still in the [hurricane] season," there's some incentive to wait and not to report a claim, he said, noting that Gov. Jeb Bush has proposed the idea of having legislation passed that would say that homeowners only suffer one deductible during the hurricane season.
"From a public relations standpoint," that makes sense for the industry. "The industry's not going to make any friends" seeking that second deductible, Mr. McCord said.
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