HURRICANE PREMIUMS ~ Rates high, despite clear skies
Just because the U.S. hasn’t been hit with any big hurricanes this year doesn’t mean local homeowners will get relief from skyrocketing property insurance rates.
Insurers say they base their rates on the “potential” for future losses, so an average hurricane season doesn’t mean a bad one isn’t coming in the next few years.
• In fact, only four major hurricanes stronger than Category 3 have hit South Carolina since 1900. North Carolina had 11 and Florida saw 27 major hurricanes during that time.
S.C. Department of Insurance Director Eleanor Kitzman said none of the insurance companies who provide coverage in South Carolina have given her any indication about next year’s rates. They are waiting to see what their reinsurance costs will be, she said.
• But she said in August that if the U.S. could have even an average hurricane season, it may ease some pressure on rates, causing them to moderate slightly due to more carriers joining the market.
• The nation’s active hurricane cycle started in 1995 and is predicted to last 20 to 25 years, said Dennis Feltgen, public affairs officer for the National Hurricane Center in Miami.
National Hurricane Center in Miami
So far this year - hurricane season doesn’t end until Nov. 30 - there have been nine named storms, five of which grew into hurricanes. Two became major hurricanes.
• Predictions called for 13 to 16 named storms this season, with eight to 10 of those becoming hurricanes and 4 to 6 becoming major hurricanes at Category 3 or stronger.
• This year’s “average” hurricane season was caused by a greater than expected wind shear and more stable atmosphere. That made it tough for air to rise in the Gulf and Atlantic.
• Also, a strong area of low pressure over the Eastern U.S. combined with high pressure over the central and eastern Atlantic allowed storms to curve harmlessly out into the Atlantic, Feltgen said.
• Next year’s forecast will not be issued until May, he said.
Part of the reason that South Carolina is getting hit with high premiums in spite of this year’s lack of big storms is that reinsurers “paint the same brush” along the East Coast, saying it all has the potential for massive loss, said Jim Byrd, deputy director of market services at the S.C. Department of Insurance.
• He urged them to buy insurance between Dec. 31 and May 30 - before hurricane season - so they are not coming up for renewal during the fall.
• Byrd said he hopes the slow hurricane season will ease reinsurance rates, but there are no guarantees.
• A main driver of rising insurance premiums along the coast is the global reinsurance market, which readjusts rates in January.
Gov. Mark Sanford is waiting until then to see if reinsurance costs drop before making a decision on expanding the state’s wind pool territory, said Sanford’s spokesman Joel Sawyer.
It may take several mild hurricane seasons before rates drops, said local independent insurance agent Tommy Cook, owner of John T. Cook & Associates.
• But it could be next year or 2008 or 2009 - barring major hurricanes - before rates really come down, he said.
Source: Jenny Burns, The Sun News, Myrtle Beach, SC
