Florida’s First Hurricane in 11 Years ‘Could Have Been a Lot Worse’ for Industry

By | September 12, 2016
A large oak tree toppled over a Whataburger restaurant in Tallahassee, Fla., Sept. 2, 2016. Many businesses and homes in Tallahassee are without power and several roads are blocked due to tree damage caused by Hurricane Hermine. (AP Photo/Brendan Farrington)
A large oak tree toppled over a Whataburger restaurant in Tallahassee, Fla., Sept. 2, 2016. Many businesses and homes in Tallahassee are without power and several roads are blocked due to tree damage caused by Hurricane Hermine. (AP Photo/Brendan Farrington)

The 11-year hurricane drought in Florida is officially over. While preliminary damage estimates and claims are still trickling in from Hurricane Hermine, Florida’s first named hurricane since 2005, the consensus from the insurance industry is it could have been a lot worse.

Hurricane Hermine broke the state’s long streak without a hurricane-strength storm when the category 1 storm hit Florida in the wee hours of Sept. 2, battering the Panhandle and bringing significant storm surge to the Tampa Bay area before slowly traveling up the Eastern Seaboard.

The storm weakened to a tropical storm as it moved inland in Florida, with winds topping 70 miles per hour, according to the U.S. National Hurricane Center, but it was still enough to cause widespread damage and power outages. The day after the storm Florida Gov. Rick Scott said more than 300,000 homes were without power. Toppled trees in Tallahassee left some residents without power for about a week.

As the lights came back on and clean-up efforts continued, the insurance industry began to see claims trickle in from wind, water, and tree damage.

Karen Clark, CEO of catastrophe risk management firm Karen Clark & Co. (KCC), said the losses aren’t anything the industry can’t handle.

“This was a very typical CAT 1 hurricane,” said CEO Karen Clark. “The biggest losses are from trees falling on houses. There was a lot of damage in Tallahassee… there were some commercial losses, but really, the wind speeds weren’t enough to create structural damage unless a tree fell.”

KCC estimated the damage would reach $500 million in insured losses with economic damages close to $1 billion. In Pasco County, officials estimated Hermine caused at least $30 million to $50 million in damages, destroyed nine homes and caused major damage to at least 297 others, the Associated Press reported. In Citrus County, initial damage assessments were estimated at $53 million.

Storm surge impacted hundreds in Tampa Bay, according to Citizens Property Insurance Corp. The state-run insurer reported Sept. 7 it had received a total of 573 claims statewide so far, with the bulk of those coming from the Tampa Bay region. Spokesperson Michael Peltier said the company was still determining if the claims were flood related or caused by wind-driven water.

The rain from the storm was also on the lighter side compared to what is seen with some tropical storms, Clark said. The fact Hermine hit in a more sparsely populated area also helped curb losses.

“This storm wasn’t extreme in any aspect – but people shouldn’t be complacent either because there wasn’t more damage,” she said.

Additional claims, such as food spoilage and business interruption, are still likely for those affected by the long power outages in Tallahassee. Gov. Scott expressed frustration at the situation that people couldn’t return to work and schools weren’t reopened several days after the storm.

“The hurricane season is not over, and next time we could be facing an even stronger storm. Cities and counties must be prepared. The state will continue to offer every available resource to Tallahassee, Leon and Wakulla counties to help families without power so they can begin to recover,” Gov. Scott said.

Gov. Scott activated Florida’s Small Business Emergency Bridge Loan Program for those impacted by Hermine. The program is managed by the Florida Department of Economic Opportunity (DEO) and provides short-term, interest-free loans to small businesses that experienced physical or economic damage during the storm and recovery efforts. DEO is currently surveying businesses in the affected counties. Up to $10 million from the state’s General Revenue Fund has been allocated for the program with short-term loans for up to $25,000 available.

Industry Response

The insurance industry was out in full-force to aid with the clean-up and recovery process. In a message to Florida consumers, Chief Financial Officer Jeff Atwater urged residents to reach out to their insurance company and begin the claims filing process.

“I encourage you to contact your insurance company, if you haven’t already, to file your claims. I have seen many insurance companies on the ground in impacted cities surveying damage and adjusting claims,” Atwater said.

The Professional Insurance Agents (PIA) of Florida distributed a dozen State Emergency Response Team (SERT) badges to agency members so adjusters licensed with the Florida Department of Financial Services could access disaster sites. The Association has distributed close to a hundred for the current badge cycle, which lasts three years and closes at the end of this hurricane season.

Corey Mathews said PIA issued a reminder to its member agents before Hermine hit that badges were available so they could respond and assist with emergency efforts.

“One of the biggest challenges after an event like this is knowing what claims need to be filed and who they need to be filed with and agents become critical components of that process,” Mathews said. “We work in these communities and are the first boots on the ground with customers… This helps them add value to do what they do.”

Peltier said that Citizens had contingency claims adjusters on alert, but was able to handle the claims in-house.

The Florida Department of Financial Services extended the hours of the Insurance Consumer Helpline to help consumers access insurance experts if they had questions about their policy or with the claims-filing process.

“It may still be a while before we know the true impact of the storm. However, Floridians can rest assured that the state’s home insurers are well prepared, and are now in the process of adjusting claims on a timely basis,” said William Stander, executive director of the Florida Property & Casualty Association.

Financially, Clark says insurers are more than capable of handling the claims that could come in from Hermine and any other storms that hit Florida this season.

“This was a small event and it won’t make it more difficult for insurers to respond to an event, even if another one happens a couple weeks from now. Look what they have handled in the past – the 2004 season followed by ’05 – the insurance industry is very geared up,” Clark said.

Stander agrees.

“Our state’s home insurers have combined capital and reinsurance to pay all claims resulting from three Hurricane Andrew-sized storms,” he said.

Fitch Ratings issued a statement saying Hermine “isn’t likely to have a significant impact on the financial condition of the Florida Hurricane Catastrophe Fund (FHCF) or Citizens’ Property Insurance.”

Moody’s said it didn’t expect Hermine would impact its rated reinsurers and the effect on the overall property and casualty industry would be modest, but that regional carriers could see a “larger effect on their third-quarter 2016 earnings.”

Mathews said there is relief that the storm losses are “not as bad as it could have been,” particularly for an area that hasn’t seen a large number of storm claims in recent years.

But with still two months to go in the 2016 hurricane season, Mathews said everyone – including the industry, state, municipalities and residents – should be mindful that Florida is still at significant risk for bigger storms.

“It is absolutely amazing that in the grand scheme of things, the ’04 and ’05 storms were only a decade ago. Eleven years later people have already become quite complacent,” he said. “It is really important that as an industry we continue to educate people to be adequately prepared and ready with an emergency plan and disaster materials to respond to a storm.”

About Amy O'Connor

O'Connor is the Southeast editor for Insurance Journal and associate editor of MyNewMarkets.com. More from Amy O'Connor

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