According to the Insurance Information Institute, 1.7 million policyholders in six states received $40 billion from insurers for Hurricane Katrina losses, which is believed increase sharply in the near future for coastal states.
These figures could seem insignificant, though, when compared to what Dr. Robert Hartwig foresees for future storms. Hartwig, who is president and chief economist of the Insurance Information Institute (I.I.I), recently spoke at the 2007 National Hurricane Conference in New Orleans, and said that a storm comparable to Katrina hitting Florida or other areas of the East Coast could cause $100 billion in insured losses.
In a release issued by the I.I.I, Hartwig said that increased coastal development, rising property values, along with the prediction of more frequent and severe hurricanes in the next 10-15 years, is driving up the cost of property insurance rates in coastal states.
Recent hurricane predictions affirm Hartwig’s unease. According to a report by the Department of Atmospheric Science at Colorado State University, there are 17 named storms predicted for 2007, nine of which will become classified as hurricanes. Of those nine, five are predicted to reach intense hurricane status, or Category 3 strength and higher on the Saffir-Simpson scale.
Hartwig also voiced his economic concerns about the upcoming hurricane season, and used Florida as an example. “Florida’s state-subsidized Citizens Property Insurance Corporation is now the largest home insurer in that state. This development will have significant repercussions for all of Florida’s homeowners’ insurance policyholders and taxpayers after the next hurricane hits.”
Citizens will not have the financial resources to pay on claims made after a severe hurricane, the I.I.I reported in the release. In that situation, state lawmakers would have to increase assessments for all homeowners’ insurance policyholders in Florida, or raise taxes.
The apprehension comes with good reason given that in 2005, insurers of last resort in Mississippi and Louisiana had financial obligations to that exceeded their revenues, causing them to run hundreds of millions of dollars in deficits, according to the I.I.I.
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