Coastal insurance market update–2023

We have all seen on the news the of the intense hurricanes hitting Florida, the big Texas freeze in February of 2021 and most recently “island towns” forming in California due to runoff from the large amount of rain. The claims resulting from catastrophes are known as catastrophic losses in the insurance industry and over the last five years the world has seen a lot of them. These losses also drive pricing for insurance.

We are blessed to be able to own property close to the coast. We also know the risk and are reminded of that when we see towns on the Gulf Coast get clobbered by a storm. The insurance industry knows it too.

Reinsurance

Insurance companies are required to have funding to pay for the total value of the properties they insure with either cash on hand—or they purchase insurance known as reinsurance.

Reinsurance is insurance for insurance companies that transfers some of the financial risk the insurance companies assume to another company, the reinsurer. This is like your deductible on your policy, the carrier wants you to take a small portion of the risk and will pay for the rest of the loss. Unfortunately, the insurance industry has had to work through some major losses over the last five years.

When Hurricane Andrew hit Florida in 1992, it was the first $20 billion dollar event. In the last six years, there have been seven $20 billion dollar events! While the costs of everything have gone up and the coast has been built up all over, these are large loss events in a tight time frame. These large events caused the reinsurance market to pay large amounts for the ensuing claims.

As a result of these losses, the reinsurance market is getting difficult for insurance companies, which are seeing large increases in their costs, which will be passed onto the consumer. Coastal properties will likely feel it more than a property in Pennsylvania. How will you feel it? There will be higher than normal rate increases. We will see carriers require wind deductibles be added or increased. We will see carriers opting to decrease their exposure by not offering renewal terms. We will see carriers move completely away from writing policies on the coast by canceling the policies they write in certain areas.

Many clients have experienced this with notification letters from their insurers advising they filed for a rate increase with the New Jersey Department of Banking and Insurance. This is required by law in New Jersey and the number can be shocking with carriers requesting 15-35% rate increases! Historically, the carriers ask the state for a much higher number than the actual rate increase the state approves. Some clients have received letters from their carriers to inform them that their policy will not be renewed. Just last year, my mother received a nonrenewal letter for the house my parents insured with same carrier for over 30 years.

Be aware of what your purchasing

We want to be up front and honest with what is going on in the marketplace. We know you see advertisements on TV from lots of insurance companies. Not one of them will write new business on the coast; in fact, one is the carrier that nonrenewed our parents’ house.

Some of those carriers will offer a quote on the coastal home, but they are using a secondary market. We have had customers send us these quotes and often the saving is found by removing or reducing valuable coverages.

We are fortunate to have several companies that are writing new business on the coast and they are working hard to make sure we get you the best carrier and coverage we can. If you have questions about your home or one that you are considering purchasing, contact your professional insurance agent.

Additional resources for PIA members

PIA members can access the following resources in the PIA QuickSource library:

• New York’s Coastal Market Assistance Program application and instructions for completing; and
• Wrap-around options for coastal homeowners risks.