What the Florida Industry Needs to Know for the 2018 Hurricane Season

The 2018 hurricane season is officially underway, even as the dust continues to settle on the 2017 hurricane season — one of the costliest hurricane years on record — that brought devastation to Florida from Hurricane Irma.

Meanwhile, the Gulf Coast has already received a stark reminder to be prepared from a Memorial Day storm — Tropical Storm Alberto.

Irma first hit the Florida Keys as a category 4 storm on Sunday, Sept. 10, with 130-mile per hour winds. It then worked its way north passing over the east and west coasts. Loss estimates from Hurricane Irma ranged between $25 billion to $65 billion by catastrophe modelers.

According to the Florida Office of Insurance Regulation, 90 percent of the 770,658 reported residential property claims had been closed as of April 6, 2018. Total estimated insured losses as of April 12 had reached $8.6 billion. The Florida Hurricane Catastrophe Fund is expected to pay out $2 billion in claims associated with Irma.

Citizens, the state-run insurer of last resort, said in March it had reopened about 37 percent of Hurricane Irma claims as part of ongoing efforts to assist policyholders affected by the storm. As of March 28, more than 24,500 of 66,400 Irma claims, about 37 percent, were reopened for supplemental payment and to allow policyholders or their representatives to provide additional information.

Overall, Citizens has closed nearly 90 percent of its Hurricane Irma-related claims. Open claims include extensively damaged properties, disputes and those waiting for a contractor to provide a repair estimate.

The National Hurricane Center updated the death toll from Irma in April to 44 fatalities directly caused by strong winds and heavy rains, plus 85 fatalities indirectly linked to the storm.

Still, Irma could have been worse, a fact the Florida insurance industry is aware and mindful of as it heads into the 2018 season.

“Last year was a reminder that every hurricane season has the potential to produce powerful and devastating storms,” said Chris Hackett, senior director of PCI.

Mother Nature wasted no time starting off the 2018 hurricane season, kicking the Atlantic — and more specifically the Gulf Coast — into high gear several days ahead of the official June 1 start date.

Tropical Storm Alberto hit the Florida Panhandle on May 28, bringing winds, rains, and even the possibility of tornadoes. The National Hurricane Center in Miami said winds from the tropical storm reached up to 65 miles per hour.

There is undoubtedly more to come as the season progresses. The National Oceanic and Atmospheric (NOAA) released its forecast for the 2018 Atlantic hurricane season in May, estimating a total of 10 to 16 named storms, of which five to nine could become hurricanes and one to four expected to become major hurricanes with winds of 111 miles per hour or more. It noted a 75 percent chance that this year will be a near or above normal hurricane season.

“The possibility of a weak El Nino developing, along with near-average sea surface temperatures across the tropical Atlantic Ocean and Caribbean Sea, are two of the factors driving this outlook. These factors are set upon a backdrop of atmospheric and oceanic conditions that are conducive to hurricane development and have been producing stronger Atlantic hurricane seasons since 1995,” NOAA said.

• 1. Have a business continuation plan in place in the event your office is not accessible following the storm.
  2. Assure off site storage and access to paper and electronic records.
  3. Communicate with your various carriers regarding your agency’s hurricane response plans and claims processes.
  4. Communicate with customers ahead of a storm with instructions on how to file a claim. Should a customer file a claim with your agency or directly with the insurance carrier?
  5. Make sure your employees are safe and offices are secured against potential damage.
  6. Considering hiring additional temporary support staff to provide customer service following the storm, keeping in mind that some agency employees may not be able to return to work immediately following a storm.
     

     Source: American Modern Insurance Group

Irma served as a reminder to those in Florida of the widespread devastation a large hurricane can have on the state, particularly since it had been more than a decade since a storm of Irma’s magnitude had come through.

State officials, emergency management teams and the insurance industry have since used Irma as an opportunity to educate residents on the importance of preparation, mitigation and having proper insurance, and have spent the “offseason” getting that message out there.

Flood insurance, in particular, remains a key part of the discussion. Florida Insurance Commissioner David Altmaier and CFO Jimmy Patronis urged consumers to consider flood insurance this year.

“Hurricane Irma last year resulted in 1,778 private flood insurance claims … Taking steps now can help prevent major losses,” said Patronis.

“Flooding can happen any time of year, but the chances increase significantly with hurricanes and tropical storms. As we know from last year’s hurricane season, these systems can bring storm surge and increased rainfall amounts to our state. Having flood insurance in place is critical for homeowners and businesses, and helps our state’s response and recovery efforts,” said Altmaier.

OIR noted that 29 insurers now offer private primary or excess flood insurance in the state, usually at prices similar to or lower than those of the NFIP.

Florida’s Citizens has taken its own steps to prepare for potential storm claims. It’s board of governors approved the purchase of a $1.4 billion reinsurance program for 2018 — almost $100 million more than the $1.3 billion risk transfer program the insurer purchased last year. The cost for the reinsurance program is not to exceed $92 million, Citizens reported on May 8.

“Last year’s Hurricane Irma reminded everyone of the importance of risk transfer to protect surplus and reduce potential tax payer assessments,” Citizens’ Board of Governors Chairman Christopher B. Gardner said on a conference call.

The Florida Hurricane Catastrophe Fund reported that despite losses from Hurricane Irma, it will have $17.3 billion available to pay claims in 2018. This means that the fund has more money than it would need to pay out if storms wracked the state.

Florida officials and the insurance industry will be on high alert for any instances of fraud during the 2018 storm season as regulators and insurers try to curb the escalating abuse of assignment of benefits reportedly leading to higher insurance rates statewide. In the aftermath of a catastrophe, the opportunity for fraud significantly increases.

During the 2017 hurricane season, the Department of Financial Services formed the Disaster Fraud Action Strike Team (DFAST) that consisted of three teams of insurance fraud investigators deployed to areas heavily impacted by Hurricane Irma.

“The unfortunate truth is that some individuals will attempt to take advantage of consumers during this high-stress time,” Patronis said at the time. “To combat fraudsters attempts to swindle Floridians, we’re putting boots on the ground to ward off fraud and swiftly address any scams that may arise.”

Patronis said in a statement last month the DFAST investigations stemming from the 2017 season resulted in the arrest of 22 alleged insurance fraud criminals with nearly 100 investigations currently still open and ongoing.

The insurance industry will play a key role in ensuring AOB abuse doesn’t worsen by educating policyholders and responding to claims quickly.

“Consumer awareness is critical to prevent AOB abuse and control costs. Florida’s policyholders need to understand that when they sign on the dotted line of an AOB contract, they relinquish rights under their policy to a third party,” said Logan McFaddin, PCI regional manager.