Ian will ‘financially ruin’ landlords and insurers

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President Joe Biden declared nine counties disaster areas on Thursday, making residents eligible for federal assistance to pay for minor home repairs, short-term housing and other emergency costs.

But of the 1.8 million households in those nine counties, only 29% have federal flood insurance, according to an analysis of government records by POLITICO’s E&E News.

That leaves 1.3 million ground zero households without federal flood coverage.

In Hardee County, only 100 households have federal flood insurance — out of 8,000 households in the county.

This is a coverage rate of 1.3%.

Hardee has one of the lowest income levels of any county in Florida, and 44% of its residents are Hispanic.

“Ian could financially ruin thousands of families in Florida. There’s no better way to put it,” said Mark Friedlander of the Insurance Information Institute.

Flood coverage is not included in homeowners insurance policies. This forces people to buy flood insurance separately, although hardly anyone who lives inside a coastal area does. The vast majority of flood coverage in the United States is sold through the Federal Emergency Management Agency’s National Flood Insurance Program. It is not known how many people have flood insurance policies through private insurers.

People without flood insurance “could be devastated,” Friedlander said.

Problems, problems, problems

Meanwhile, damage from Ian’s 155mph winds could throw Florida’s private insurance market into deeper chaos, potentially forcing other insurers into insolvency and triggering a surtax on nearly all state insurance policies.

The Insurance Information Institute, an industry-funded research group, estimates that Ian caused at least $30 billion in damages. That would make it roughly the 12th costliest US disaster since 1980, according to NOAA records.

Ian hit Florida as the state faces an insurance crisis. Policyholders there pay the highest property insurance rates in the country, and huge losses have forced six small Florida-based insurers into insolvency this year while others have stopped writing new policies.

That pushed homeowners to Citizens Property Insurance Corp., the state-backed insurer of last resort. The number of its policyholders has doubled in the past two years and recently exceeded one million for the first time since 2014 (climate wireSeptember 19).

The insurers’ losses are due to a combination of large legal claims and huge payouts on policies in states such as Louisiana, which has faced two catastrophic storms since 2020.

“Florida already has a problem with [insurance] availablity. It has an affordability problem. And it has a reliability issue when insurance companies go insolvent,” said Nancy Watkins, principal at Milliman actuarial consultants. “The three pillars of a sustainable market are under threat.”

Friedlander said he expects the claims related to Ian to drive several local insurance companies out of business, making it even harder and more expensive for Florida homeowners to purchase property coverage.

“Many insurers have been in financial difficulty for several years. It can push them over that cliff,” Friedlander said.

The average Florida property insurance rate is $4,231, nearly triple the US average of $1,544, according to the Insurance Institute.

A major issue as Florida begins to recover is the extent to which damage was caused by wind or water. The issue has huge implications for homeowners without federal flood coverage and for private insurers who could face billions of dollars in wind damage claims.

Florida Governor Ron DeSantis (right) danced around a question about whether Citizens Insurance had enough money to pay wind-related claims linked to Ian. Instead, he focused on destructive flooding from the storm, which is usually covered by the federal government.

“We are reviewing many flood claims,” DeSantis said, adding that citizens should be able to pay Ian’s claims without charging a special assessment to his own policyholders, or any state insurance policies, except for medical and malpractice coverage.

Watkins said disputes and litigation will arise when property insurers like Citizens deny claims because they say damage was caused by flooding – which they don’t cover.

“In a contentious environment like Florida, it could be a perfect storm on top of a perfect storm,” Watkins said.

Records from the Florida Office of Insurance Regulation show insurance companies denied about 30% of the nearly one million claims filed after Hurricane Irma swept through the state in 2017.

Florida’s denial rate for Hurricane Matthew in 2016 was about 40%.

Citizens has $13.6 billion in reserves and plans to pay 225,000 claims against Ian worth a total of $3.8 billion.

Higher temperatures, more inland flooding

The good news for Florida is that it has more federal flood insurance policies than any other state, or about 20% of households. It’s right behind Louisiana. Nationally, only about 4% of properties are covered by FEMA’s flood insurance program.

But the bad news is that flood coverage varies widely across Florida — and among the counties that suffered the worst damage from Ian.

In the nine counties where Biden has declared a disaster, flood damage coverage rates range from 1.3% in Hardee County and 3.2% in DeSoto County to 67% in Collier, which is in the southwest corner of the state and is one of Florida’s wealthiest counties.

“There are going to be a lot of people without flood coverage,” said Carolyn Kousky, a leading flood insurance expert and associate vice president for economics and policy at the Environmental Defense Fund. “If you don’t have insurance, the economic recovery after these events is really difficult.”

Parts of Florida have suffered massive flooding and are not among the nine counties Biden has declared a disaster.

Orlando, which is Florida’s third-largest city, saw up to 15 inches of rain and experienced flash flooding, according to the National Weather Service. The city has 130,000 households.

Yet records show that only 2,039 buildings are covered by federal flood insurance.

This is a coverage rate of 1.5%.

The inland flooding caused by Ian ‘highlights the fact that as the climate changes storm patterns, we are seeing a lot of flooding away from shore due to blocked hurricanes and intense rainfall’ , Kousky said. “Many areas are at risk of flooding.”

People without flood insurance will have to rely on FEMA assistance, which is capped at $72,000 but typically results in payouts below $10,000.

When flash floods devastated eastern Kentucky in July and August, only about 2% of households in the flooded area had flood insurance (climate wireAugust 9).

FEMA gave $73 million in disaster relief to 7,800 Kentucky residents, an average of about $9,350 each.

A version of this report was first published in E&E News’ Climatewire. Access more complete and in-depth reports on energy transition, natural resources, climate change and more in E&E News.

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