How Solid Is Fla. Hurricane Underwriting?

Whether Florida's private-public insurance system for homeowners can survive the most intense of hurricanes hitting the most populous areas of the state remains untested, Standard & Poor's said

In an analyst's report put out in response to Hurricane Dennis, which struck the Gulf Coast Sunday, the New York-based ratings agency said the major insurers in the state are working to reduce their exposure but are reluctant to walk away from the fourth most populous state in the nation.

The three major national insurers--State Farm Mutual Automobile Insurance Company, Allstate Corporation and Nationwide Financial Services Inc.--have formed subsidiaries in the state to separate themselves from heavy losses.

The subsidiaries were also formed to gain leverage with the state's regulators, S&P said, but they failed to obtain the kind of mechanism to increase rates to what insurers feel are necessary levels.

While insurers can raise premiums up to 15 percent, S&P said, insurers had to limit deductibles to $500, or 2, 5 or 10 percent, with some exceptions based on property limits. An increase of more than 15 percent requires a public hearing. Because of this, S&P suggests that many of the major insurers will be looking for 14.9 percent increases.

S&P said it worries about the number of new, small insurers who are coming into the state. The companies are unrated, and S&P said it is not certain how much loss these new entities can absorb in the face of catastrophic losses.

S&P also noted that the state's insurer of last resort, Citizens Property Insurance Corporation, is working to shed some of its risks, primarily looking to the newer companies to take the risks. Citizens has more than 10 percent of the market, according to industry information from both National Underwriter Information Data Service and Citizens Web site.

This system could be stressed to its limits, S&P said, in the worst case scenario: a category five hurricane, the highest level on the Saffir-Simpson scale, with winds exceeding 155 mph, ripping into Miami and sweeping northwest to Orlando or Tampa, could cause more than $100 billion in damage.

"That's when the policies the Florida insurance industry has put in place to stay solvent will be put to the test--a test everyone hopes never comes," the analyst's report said.

According to the National Weather Service, Hurricane Dennis, now a tropical depression, is causing rainfall through Kentucky and is expected to diminish later in the week.

Scott Adcock, public information manager with the Alabama Emergency Management Agency, said two counties in the state suffered heavy damage, but it would not be until later this week before a full assessment could be made.

He said there was isolated flooding but most of the damage was caused by wind and debris. There were no deaths reported in the state.

Georgia also was experiencing extensive flooding from rain brought on by Dennis. The state's insurance commissioner, John W. Oxendine, said while the state did not receive the full brunt of hurricane winds from Dennis, the significant rainfall has raised havoc, flooding a numerous number of homes and apartments in areas where there was no flood plain and subsequently, few holders of flood insurance. Hundreds of cars were also reported caught in the floods, adding to the disaster.

The state anticipates damages will exceed $10 million and is considering requesting disaster aid from the White House.

The rains have loosened the root base of many pine trees in the state, Mr. Oxendine said, and strong winds from Dennis have easily toppled the trees. He said this led to one death in Atlanta when one of the trees crashed into a man's home, killing him as he slept.