Between deductibles, excluded losses, and difficulty accessing business interruption coverage, a business suffering hurricane losses can take a big out-of-pocket economic hit even if it has insurance.
There is a disconnect between business needs and what is ultimately covered when it comes to hurricane recovery policies, according to insurance agent Evan Glassman, president and CEO of Fort Lauderdale, Fla.- based New Paradigm Underwriters, says. He thinks the gap is big enough to warrant a supplemental windstorm insurance product.
So the Florida agent created a supplemental product for the large corporate and middle-market commercial segment. He named it Hurricane PM.
“I saw the insurance industry wasn’t addressing the needs of my client base when it comes to hurricane recovery,” Glassman said. “There are large deductibles, items not covered, exclusions, property damage requirements to trigger business interruptions, etc. It takes the policyholder quite a bit of time to recover what is ultimately covered.”
An insurance agent in south Florida for 10 years, Glassman said he wanted to address this “huge problem,” so he started New Paradigm in 2013 with Bradley Meier, founder of Universal Insurance Holdings, whose subsidiary Universal Property & Casualty Insurance is a top writer of homeowners insurance in Florida.
Through a partnership with Weatherflow Inc., a weather measurement provider that provides data on storms to government agencies and research organizations in the U.S., New Paradigm developed a coverage that is triggered by wind speeds when a large storm occurs.
New Paradigm utilizes data from WeatherFlow’s network of nearly 100 hurricane-hardened wind monitoring stations located in coastal areas from Texas to the U.S. Northeast. During a named storm the network registers the maximum sustained wind speed and the data is collected and certified by catastrophe risk modeler Risk Management Solutions (RMS), another partner for the Hurricane PM product. Insureds can be reimbursed for losses within days or weeks of the named storm.
“There is a high-correlation between wind speed and severity of damage,” Glassman said. “If there is a National Weather Service named storm then coverage is triggered. Policyholders can go to RMS.com and the event is published there. If they have any economic loss they send that into the insurance company.”
The coverage is underwritten by Allianz with minimum premiums starting at $10,000. It is available to anywhere that is exposed on the coast of the Southeast and Northeast – or Tier 1 wind areas.
Hurricane PM can provide coverage for:
- Losses below traditional insurance deductibles
- Business interruption and lost profits, including lost or reduced business in the days leading up to and following the storm
- Losses from items excluded by traditional policies
The policy is open to businesses in any segment with the best fits being those that are exposed to loss and traditionally difficult to insure. Industries served by Hurricane PM include, but are not limited to: condominium/homeowner associations; resorts and hotels; golf courses and country clubs; hospitality; commercial real estate; power and utilities; energy; healthcare, hospitals, assisted living; gaming; municipalities and infrastructure; transportation; schools, colleges and universities.
Glassman said after every big storm there is billions of dollars in insured property that are below the deductible, keeping insureds from recouping their losses. With traditional insurance, insureds typically have a property damage requirement so the days leading up to a storm are not covered.
“This coverage is really designed to solve a problem. Unlike traditional insurance, this is a supplemental policy and is very straightforward,” he said. “The insurance company doesn’t determine the wind speed. It is an economic protection policy. Any incidence of economic loss is covered.”
The company quietly launched the product in 2014 but has recently started marketing it and has seen encouraging signs so far. It is also now working with many of the larger brokers.
Right now the coverage is just available for commercial lines policies but New Paradigm is looking to expand into personal lines at some point down the road. New Paradigm is also developing other products for natural catastrophes and is working on opportunities in the Caribbean and Hawaii.
Glassman thinks once agents learn about the new policy, it will make a lot of sense for their clients.
“It’s so different from what the insurance industry is used to in most cases – it’s really just takes agents understanding it and embracing it and selling it,” he said.
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