17 April 2014News

Florida’s stance on flood insurance may spell opportunity

Florida Insurance Commissioner Kevin McCarty has stated that Floridians should prepare for the 2014 hurricane season by enhancing their coverage to include flood insurance, creating potential opportunities for the market.

Flood coverage is not typically included in hurricane policies and McCarty is encouraging consumers to consider purchasing flood coverage in order to fully protect their properties and businesses.

His call could spell opportunity for Bermuda players who have seen their traditional focus on US wind risk—Florida in particular—undercut by convergence capital.

Alternative capital has been attracted to the state and US wind risk by the granularity of model data and a number of alternative capital deals have zeroed in on the risk.

Flood is however regarded as a more complex risk, one that is less easily modelled and transferred into the alternative risk space.

McCarty’s clarion call should open up opportunities for private carriers, although many consumers will be able to take advantage of coverage from the National Flood Insurance Program (NFIP).

The NFIP allows the purchase of up to $250,000 for property damage and $500,000 for commercial structures, but excess flood insurance must be bought from private carriers.

Opportunities for private carriers have however faced a considerable reversal following the gutting of the Biggert-Waters Bill. Consumer pressure in response to planned rate increases prompted a volte face on Capitol Hill, with planned annual rate increases having been moderated.

The changes mean that flood coverage is attractively priced. “The fact is, now is the time to buy a flood insurance policy if you need one,” says McCarty.

While the roll-back of planned rate increases is unlikely to be welcomed by the private market, McCarty’s stance should encourage greater take-up. Such an approach will help to create a larger market for flood insurance, creating opportunity when federal coverage is finally drawn back.