WEATHERING HURRICANE SEASON

Rough Notes, Nov 2004 by Zinkewicz, Phil

Independent agents braved seemingly relentless hazards to help insureds through this year's storms

As the holiday season rapidly approaches, many of us, especially those with travel plans, look anxiously to our weather experts to see what Mother Nature has in store. Will the kids be able to make it in for Thanksgiving dinner, or will a nefarious nor'easter cause them to be late for the sumptuous repast that awaits them? Will there be a white Christmas and, if so, how white and how deep? Will we find ourselves needing snow plows instead of snow shovels, or will the winter days be rainy, damp and dismal?

These are some of the uncertainties that many of us face about this time of year. But we would do well to remember that they are very minor ones compared to the uncertainties faced by residents of Florida, after the state's devastating hurricane season this year. As of the last week in September, Florida had just become the first state since Texas in 1886 to be the victim of four hurricanes in one season. These destructive storms hit in a six-week period from mid-August through the end of September. One of the most pressing concerns for Floridians, undoubtedly, will be what their insurance picture may be like in light of the recent devastating hurricanes.

Friday the 13th

First, there was Hurricane Charley. This hurricane struck Florida on Friday, August 13, causing $6.8 billion in insured damages (according to the Insurance Information Institute, I.I.I.), leaving more than two dozen people dead and many more without homes, even though it hit a relatively sparsely developed stretch of the state before moving into North Carolina and South Carolina, more like a tornado than a hurricane. In the immediate aftermath of Charley, Robert Hartwig, the I.I.I.'s chief economist, called Charley the second most costly hurricane in U.S. history in terms of insured losses. The most expensive, Hurricane Andrew in 1992, caused an estimated $15.5 billion in insurance property damage, according to the I.I.I. If Charley had been all there was to deal with, that would have been enough.

Labor Day weekend

But then, just three weeks later, during the Labor Day holiday weekend, along came Hurricane Frances. Frances swept through most of Florida in severe squalls, and wrought destruction in a scattershot fashion. Then, weakened after its long rampage through Florida, Frances became a tropical storm and began its move into the Gulf of Mexico, leaving chaos in its wake. Frances virtually shut down the fourth-largest state, home to 16 million people, for two days and caused damage not just to buildings-property damage estimated at $4.4 billion by ISO's Property Claims Services unit-but to the state's $53 billion tourism industry on the usually busy Labor Day holiday weekend.

The $9.1 billion citrus industry, hard hit by Hurricane Charley right before Frances, took another blow as Frances moved across the state's best growing regions. The human toll, in lost housing and livelihoods, will also be great. "We think it's going to be an enormous bill," American Red Cross President Marsha Evans told CNN shortly after Frances' journey through Florida. "We think that it's going to involve many more families perhaps than Hurricane Andrew did because it is so widespread."

Ivan the Terrible

And right on the heels of Frances-less than two weeks later-came Ivan, hitting Florida on September 16. According to figures released by the Insurance Information Institute right after Hurricane Ivan, about one out of every five Florida homes had hurricane damage as a result of Charley, Frances and Ivan. Although Ivan, having hit only the panhandle area of Florida, caused much less damage to the state than did Charley and Frances, taken together, the three hurricanes are estimated to have produced insured losses in excess of the $15.5 billion caused by Hurricane Andrew.

Making history with Jeanne

And if all of that weren't enough, Hurricane Jeanne hit Florida in the early hours of September 26, 10 days after Ivan, becoming the fourth hurricane to hit Florida in one season. Adding insult to injury, Jeanne hit at almost the exact location that Hurricane Frances had just a few weeks prior. According the ISO's Property Claims Services (PCS), estimated losses were around $4.4 billion in the first days following Jeanne. Risk Management Solutions (RMS) estimated that insured losses could climb as high as $8 billion. RMS also said that Florida's cumulative insured losses from the four hurricanes could reach as high as $25 billion.

One important question is how the insurance industry has fared during these catastrophes. How have agents and insurance companies conducted themselves in the face of Floridians' distresses? Well, it appears that agents have once again proven their worth in these times of catastrophe, raising their industry's overall public relations posture considerably. Insurers, however, have come under criticism because of the property insurance deductibles they have been imposing since Hurricane Andrew.