While it has paled in comparison to Hurricane Katrina, Wilma still could rank as the fifth costliest catastrophe in U.S. history and has put new strains on the Florida insurance market, according to a leading ratings agency.
Fitch Ratings said earlier this week that it does not believe Florida insurers have received an adequate return since Hurricane Andrew in 1992 and that they have not recovered from the 2004 season.
"As a result, there is little incentive for a well-capitalized insurer to remain in the market or for a start-up insurer to capitalize well," said Fitch spokesman Ken Reed.
The highly capitalized and rated national insurers have withdrawn in the wake of Andrew in favor of state-sponsored entities and thinly capitalized Florida-only insurers, he said.
"The deterioration of the insurance market has occurred against a backdrop of highly appreciating property values–particularly along the higher risk coastal areas, thus increasing the severity of losses when they occur–and increased frequency of losses from back-to-back seasons with multiple hurricanes," Mr. Reed noted.
Fitch also noted that Florida insurers face regulatory risk if they try to obtain rates that make it attractive to write the business in the face of a political climate loathe to grant such increases.
Adding to this is the fact that Citizens, the insurer of last resort sponsored by the state, will probably have to make assessments of private writers once again, which could incur a political backlash from residents who feel they are bailing out high-risk coastal properties.
As if to underscore this trend, A.M. Best placed Nationwide Insurance Company of Florida under review with negative implications as a result of the losses the company suffered from Hurricane Wilma.
Nationwide earlier this year announced it was scaling down operations in Florida.
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