Hurricane Matthew More Hype Than Bite So Far But Insurers, Agents Remain on Alert

While Hurricane Matthew rages along Florida’s coast, with the end potentially still hours away, the insurance industry seems to be breathing a sigh of relief, thus far.

As of Friday morning, Matthew seemed to have spared South Florida major damage but was traveling north towards Jacksonville where major flooding is expected.

“We were very lucky,” said Robert Grand, vice president of Risk Management at CBIZ Insurance Services, Inc., a nationwide agency with a heavy presence in the Southeast. “There was very minimal damage in South Palm Beach County, as well as Miami and Broward.”

Grand, who is located in the company’s office in Boca Raton, Fla., said his office closed yesterday and reopened at noon today to start assisting clients with claims, but so far hasn’t received any reports of damage.

“So far, the general consensus is we are happily surprised that the storm wasn’t as bad as expected,” he said.

Jeff Grady, executive director of the Florida Association of Insurance Agents (FAIA), said the association has also heard few reports of problems in the southern part of the state.

“Really all of our coastline from Palm Beach and south seems to be in pretty good shape and from an insurance standpoint that is where the most density and higher values are,” Grady said. “We talked to agents this morning who never lost power and in Dade County the winds never reached more than 25-30 miles per hour… those are good facts from an insurance standpoint.”

FAIA was getting ready to deploy its mobile disaster command post once the storm has stopped and recovery efforts really begin.

Grady said that he expects claims will be divided between wind and rising water, and agents will become a crucial source in dealing with any disputes.

“That can be tricky – agents become the person in the middle. Hopefully there won’t be much with that this time but ’04 and ’05 it was a real problem,” he said.

While claims were not yet coming in the losses are not expected to be anything the industry can’t handle.

“There is plenty of capital that is not only driving down rates but ample capital to handle a monster storm,” said Gary Marchitello, Head of Property Broking, Willis Towers Watson.

Fitch Ratings said it expects losses to be manageable.

“Hurricane Matthew will pressure the earnings of some insurance underwriters in Florida and other Southeast states, but it is not expected to present a major capital challenge,” the ratings agency said in a statement.

Claims could impact rates on the residential side, especially if the assignment of benefits (AOB) issue that has plagued Florida and been called a state “insurance crisis” by state-backed insurer Citizens Property Insurance Corp. worsens after this storm.

Grady said the bulk of claims that do come in will likely be residential, and agents are urging their customers to contact them first. He said the carriers and regulators are “frightfully concerned” of what could happen.

“Everyone is dreading that AOB fraud is about to be unleashed from the heavy claim volume that is about to be experienced,” he said. “The hucksters are warming up trucks now to canvas neighborhoods – and it’s going to be onslaught, I fear.”

Fitch said this event will be a test for the market.

“The limited history for the newer specialty insurers means that the resiliency of their balance sheets and claims management functions are relatively untested by a large catastrophe event,” Fitch said. “Loss experience from Matthew will provide insight into the underwriting expertise of the Florida specialist companies and their ability to service a significant amount of claims.”

The industry is urging agents and their clients to stay vigilant.

“This storm could have a brought much more devastation to South Florida so for that we are very lucky,” Grand said. “For everyone north, that could give reason for hope to them but of course it is no guarantee and they should take all precautions.”

Fitch added with several hours to go before the storm is over, it is too early to tell the industry’s exact response.

“Evaluations of damage related to Matthew will depend heavily on the storm’s ultimate path. Post-storm, it will take significant time to assess industrywide and company-specific insured losses,” the company said.

Marchitello said that he expects underwriters to be cautious with new business and renewals at least for the next few weeks.

“Even with this loss being more minor than expected, skittishness among underwriters will remain until we get out of hurricane season,” he said.