Posted by guest author Brian Scarborough, CIC, REBC, 12/31/08
For some reason, Aaron thought it would be interesting for me to submit a post about the property insurance market in our area. With that said, may the Good Lord help any of you who would read such an article on New Year's Eve.
I guess if there was a silver lining in the real estate arena for 2008 it was that once again our area was spared any major storm activity. For the second year in a row, more property insurers were willing to write commercial and personal property insurance policies and premiums dropped as well, especially for those with newer properties.
It remains challenging to place older properties and wood/metal frame buildings in particular still have trouble finding coverage for pre-2005 premium amounts. For those older homes (defined as older than 20 years), the most significant area that prospective insurers look at are building updates. Before 2006 I'd never heard of a 4-point inspection or wind mitigation credits, now they're part of the everyday vocabulary in the insurance world. Those looking to sell their house now have to consider replacing roofs that aren't leaking just so the next owner will be able to get insurance and therefore close on their mortgage. I've seen similar instances regarding electrical panels and wiring types.
And while the number of carriers and pricing have improved, the old line insurance companies (READ: Those with money in the bank) still are not writing because of the exposure to the Hurricane Catastrophe Fund assessments/bonding. Our Governor (Whose motto is Don't Worry Be Happy) and the State's Department of Insurance Regulation, still refuse to allow for any rate increases which means those truly solvent carriers remain on the sidelines. Your initial reaction is probably that its good that insurance companies can't raise rates and I completely understand. With that said, I'd argue that it would be equally important that the companies providing insurance actually be capable of paying claims in the event of the inevitable large hurricane event. Currently, that just is not the case.
So, to put a bow on this little post, the good news is that your premiums are down and you have more options in terms of carriers. The bad news is that your State will very likely be bankrupt when the wind does invariably blow and the insurers they've allowed to replace the USAA/Allstate/Nationwide/State Farm's of the world admit that they're not properly capitalized to pay the claims. Again, the good news is that the State will step in to pay those insolvent carriers' claims. The bad news is that the "State" is us.
Guest author Brian Scarborough, CIC, REBC, is a senior insurance consultant at Scaborough Insurance company. For more information on Brian or SCI see www.scarins.com . Brian's also an accomplished blogger and his webblog about gator football is second to none. Check it out at www.thegatorreport.com
