In Part 1 of this episode, host Maiclaire Bolton-Smith sits down with CoreLogic's Senior Catastrophe Response Manager Jon Schneyer to discuss the aftermath of Hurricane Ian’s impact on the Florida coast six months later. The catastrophe impacted a state where the insurance market was already stressed, and now the government, homeowners and insurers are working to reorient themselves and build a stable environment in an area that increasingly faces natural hazard events due to climate change.

Find full episodes with all our guests in our podcast archive here: https://clgx.co/3zqhBZt

In This Episode:

• 2:47 – Meet Erika Stanley, our new Facts Guru
• 3:30 – So why was Hurricane Ian so devastating?
• 5:26 – Let’s talk about the Florida insurance landscape and how Hurricane Ian will affect things
• 7:00 – How has the Florida Legislature worked to help the insurance industry recover?
• 10:20 – The Sip: The numbers you need to know in the property market
• 11:25 – Will Hurricane Ian make waves in the reinsurance market?
• 13:34 – Will this storm affect the National Flood Insurance Program (NFIP)?

Jon Schneyer:

The total losses could have been record-setting.

Maiclaire Bolton Smith:

Wow. Okay.

JS:

MBS:

Then Hurricane Ian made landfall. At the time, CoreLogic estimated this would be the costliest Florida storm since Hurricane Andrew. Estimates showed that insured wind and flood losses to residential and commercial properties were expected to be between $31 and $53 billion. This includes losses to both private flood insurers and the National Flood Insurance Program or NFIP. While the full picture is still coming into focus, a few trends have emerged for reported claims, losses and damage resulting from the storm. So to talk about what we have seen in the last six months since Hurricane Ian made landfall, the state of the Florida insurance landscape and where the insurance market may go from here, we've invited back CoreLogic's Senior Catastrophe Response Manager, JS.

JS:

Thank you so much for having me. Happy to be back.

MBS:

JS:

Yeah, of course. So, like you said, I manage the event response program here at CoreLogic. So in the aftermath of any major catastrophic event, whether that be something like Hurricane Ian or earthquakes in Turkey, as a modeling company, we will release model information to our clients or to the general public. So it's my job to manage that whole process, coordinating the internal stakeholders, a lot of the writing, making sure our message is out there so that everyone can see it and read it.

MBS:

Great. Okay. Well, we are happy to revisit this topic with you. So, I'm sure everyone remembers Hurricane Ian since the storm made landfall, it was just a little over six months ago now. So, can you just do a little bit of a recap on why this storm was such a big deal, both in terms of the damage that we saw and the impact on the Florida insurance industry?

Erika Stanley:

Hi, everyone. I'm Erika Stanley. I'll be replacing our Facts Guru, Katia for the remainder of the season, but don't worry, not much is going to change. Maiclaire is still going to be hosting our conversations with experts and I'm still going to provide clarifications as well as economic trend insights to make sure that you know what is happening with the property market.

Before Jon reminds us why this storm made headlines last year, we wanted to ask our listeners to tell us their stories about Hurricane Ian and their experiences with insurance in the aftermath. You can leave a comment on our social media using the handle @CoreLogic on Facebook and LinkedIn or @CoreLogicInc on Twitter and Instagram. You can also leave a review on Apple Podcasts. But now let's get back to Maiclaire and Jon.

JS:

Of course. Yeah, so Ian made landfall in southwest Florida near Fort Myers back on September 28 as a high-grade Category 4 hurricane with maximum sustained wind speeds around 150 mph but gusts higher than that were recorded. The wind was only really part of the story though, due to Ian's nature, the size of it, how far it reached and where it made landfall, the coastal flooding, AKA storm surge, was catastrophic and we saw storm surge depths exceeding 10 feet in some areas along the coast. So there was a high potential for destruction based on the floodwaters, and if we combine that with the fact that coastal exposure in Florida is growing, both in terms of the number of new constructions and value as well, the total losses could have been record-setting.

MBS:

Wow. Okay.

JS:

MBS:

Oh, right. Yep.

JS:

So I mean different landfall locations, but similar category, and both were very large storms in terms of how big they were, their reach, which was worrisome because primary carriers, reinsurers, are still feeling the effects of Irma six years later. Delayed claims, litigation, costs associated with litigation means that insurers and reinsurers are still paying Irma several times over, even years after the event. So people were afraid that when Ian made landfall, that was going to happen again and they'd be paying for it year after year. Many of these carriers aren't afraid of paying for an event like Ian or Irma but they don't and can't pay for it year after year.

MBS:

Right. Yep.

JS:

So you combine all that with record level inflation when it comes to restoration materials and labor, I mean claims were going to be more expensive, shrinking reinsurance capacity. It meant that Ian could have been close to a Hurricane Andrew-like loss event.

MBS:

Right. Okay. So there's a couple of things I want to dive into there. I really want to talk about this Florida insurance landscape. One thing I did want to mention that you did touch on insurance and reinsurance. So what we're looking at there is — I think many people are familiar with what insurance is and reinsurers is essentially insurance for insurers. So yeah, the reinsurance market was really impacted and continues to be impacted by these events. But if we look specifically at Florida, before Ian hit, the AP News reported that over a dozen companies had stopped writing new policies in Florida and that average insurance premiums were rising at triple the rate of the national average. So, this is before Ian hit. So where are we now? Has the situation gotten worse or have companies just pulled out of Florida? Just thinking of first there was Irma and then there was Ian, there's smaller storms that came in as well. Where is the state of the landscape of the Florida insurance market right now?

JS:

ES:

MBS:

Yeah. That's great because the impact on the homeowner...the really unfortunate part of all of this is them not having an option when they... I mean, we need insurance on our homes knowing that these events will continue to happen.

JS:

Yeah, exactly. And hopefully, like I said, it's the homeowners who are having to pay these incredibly high premiums but it's not like insurers are intentionally making their life difficult. The pressure is on them, they can't afford to pay out the number of claims and the severity of the claims that they're seeing. There's no reinsurance capacity for them. Reinsurers don't see this as a profitable business. I know it seems harsh to say, but it's still a business and if it's not profitable, they're not going to provide reinsurance capacity. Insurers can't get that. It gets passed on to the homeowners in terms of premium increases or deductible increases.

MBS:

Right. Yeah.

JS:

So a lot of the bills that the Florida Senate passed back in May were aimed to either increase reinsurance capacity by creating essentially a new layer of reinsurance that insurers could adopt and to reduce the factors that are leading to inflated claims, which is not because the damage was so bad, it's the bad apples. It's the people who are making fraudulent claims or the litigation cost. So you make a claim, and your insurer says, "No, your policy doesn't apply." And then you get into a lawsuit and then insurers would have to pay the litigation fees. They have to pay for obviously their own teams, but they have to pay for the litigation fees for the plaintiffs as well. And that is really what has inflated the Hurricane Irma losses even three years after the event, loss creep has been one of the biggest issues and the bill changes are hoping to mitigate that aspect of it so that insurers can insure because they can properly model hurricane risk. So they're just hoping that the loss adjustment expenses are minimized.

MBS:

Right. Okay.

ES:

Speaking of ensuring the value of property investments, it's that time again. Grab a cup of coffee or your favorite beverage, we're going to do the numbers in the housing market. Here's what you need to know.

MBS:

Okay. So something you mentioned a little bit — that I just do want to offer a clarification to because people may not be familiar with reinsurance. So reinsurance essentially is insurance for insurers. So can you talk a little bit about how this storm ... do we know yet about how has there been an impact on the reinsurance market?

JS:

It's a good question and I mean at a high level it's a little too early to say for sure.

MBS:

Okay.

JS:

We have seen a number of stories about certain carriers who have either dipped into their reinsurance towers or some of them have completely wiped through their insurance towers. So, in some cases, yes, reinsurers have been impacted and they've had losses because of Hurricane Ian, which is not a bad thing, that's the reason you have reinsurance. So, in that sense, it's actually worked out pretty well.

Now, we don't know the full extent, that'll remain to be seen as claims are closed and the loss tolls for individual carriers increase. But hopefully the legislative changes I mentioned earlier, the effect of those will be that the losses to the primary carriers are within reason and insurers can start writing more reinsurance policies to carriers in Florida. More insurers can come back to Florida and all is good.

MBS:

Okay.

JS:

So, for primary carriers, yeah, some have dipped in to their reinsurance towers. Now, the National Flood Insurance Program, they also pay for reinsurance. So I saw, as of today, the NFIP has paid out about $2.2 billion in claims relating to Ian so far.

MBS:

Wow. Okay.

JS:

They're estimating that their flood losses will be between $3.7 and $5.2 billion, but if they surpass $4 billion, then their reinsurance towers trigger. So we don't know if that'll happen yet. Like I said, it's on its way but it'll be a while till all those claims are closed. But there's a possibility some of their reinsurance will trigger, but luckily they have reinsurance so will be able to pay those flood claims.

MBS:

If you don't live in a Special Flood Hazard Area or if you don't have a mortgage, then you're not required to have flood insurance at all. But we've seen that flooding does not just happen in these areas that are designated as a 100-year flood zone. So there ends up being a lot of people without flood insurance that have a lot of flood damage. So, I guess you talked about NFIP, the National Flood Insurance Program, what are we seeing? Are there any trends in terms of NFIP, in terms of flood damage in general? Both those that are paid by NFIP versus flood that's maybe outside of NFIP. Are we seeing any patterns or what have we seen from a flood perspective?

ES:

Next week we'll pick up in Part 2 to talk about what trends are developing around claims made under the National Flood Insurance Program. However, you can get a primer on what the federal government has updated as part of its flood insurance risk rating system in Episode 31: A Flood of Change Comes with FEMA's Risk Rating 2.0. We'll pick back up next week. See you there.

MBS:

Thank you for joining me today on Core Conversations: A CoreLogic Podcast. And thanks for listening, I hope you've enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released. And thanks to the team for helping bring this podcast to life, producer Jessi Devenyns, editor and sound engineer Romie Aromin, our new Facts Guru Erika Stanley and social media duo Sarah Buck and Makaila Brooks. Tune in next time for another Core Conversation.