If You’re Not Concerned, You May Not Be Paying Attention Mike Silvers, CPRC, Silvers Systems Inc. and FRSA Director of Technical Services
It seems lately that I cannot escape the obvious subject for this column – insurance. As much as I would like to cover something like a new roof installation method, the property insurance issue and the interaction with the roofing industry, as well as the building code, continues to be front and center, making it very hard to ignore. As those involved in the roofing industry know, there seems to be something new every day. Most of us are well aware and very concerned about what the current state of affairs has done to our trade’s reputation. With so much information and misinformation coming from so many sources, it can be hard to see the big picture. It is important to look at the issue from the industy’s perspective.
$56 billion in annual premium. By the end of 2022, the Fund balance will be approximately $12.8 billion. This sounds like a lot of money and it certainly is. It accounts for approximately one percent of Florida’s $1.2 trillion gross domestic product. But it may not be enough when you consider that the cost of insurance claims paid out for Hurricane Andrew were $15 billion in 1992. Today, according to RMS (a highly-regarded Moody Analytics Company), the cost for the same claims would be between $80 to $90 billion. Other sources estimate a current cost between $50 to $100 billion. One needs to keep in mind that even though Andrew was a very powerful storm, its highest winds were concentrated outside of a major metropolitan area. If Andrew had been centered just 25 miles The Florida Hurricane Catastrophe Fund further north, you could have multiplied the amount of Has the Potential to Devastate Our State’s damage and claims many times over. Economy Hurricane Irma occurred in 2017 and the Cat Fund The Florida Hurricane Catastrophe Fund (FHCF) or paid approximately 43 percent of the losses. The Cat Fund was established in 1993. It is a tax-exempt common understanding is that the larger the storm, trust fund that acts as reinsurance for approximately the higher the percentage paid out by the Fund. It’s 165 of Florida’s property insurers, including Citizen’s. clearly not hard to imagine property damage claims of Recently the Fund has been asked to cover additional over $100 billion from one major storm that impacts exposure by acting as a guarantor or reinsurer to cover any of Florida’s urban coastal communities with high property insurers whose ratings have been downgrad- density population. Multiple storms could add to that ed. The administrators of the Fund have the authority already staggering number. Using the $100 billion to levy emergency assessments on all property and figure and a 50 percent ($50 billion) Cat Fund hit, you casualty insurance lines except workers’ compensacan see that the Cat Fund would be quickly depleted tion, medical and federal flood. The insurance lines in this very plausible scenario. Florida would be left that could be levied currently represent approximately covering a Cat shortfall of $38 billion in claims while at 16
FLORIDA ROOFING | October 2022