Storm & Security

PROTecT/YOURSELF polices being dropped are picked up by a start-up insurance carrier with limited financial resources, or a state insurance fund backed by state bonds. This, in turn, adds additional bonds to be sold in a crowded bond market. 2) If a start-up market they insure after a hurricane. Properties insured by state pools are not counted as insured properties when cal- culating the assessments so, by default, the remaining carriers' market shares increase. In a market region where large continued Seaboard if a major hurricane were to strike with the fury of a Katrina or Andrew. A storm skirting the coast would have huge implications as the amount of claim damage increases proportionately the closer you get to the coastline where The average flood claims from Irene were only $28,000. After a major hurricane the number of claims would double and an average amount would be more in line with the Katrina range, which was $98,000 per flood claim. carrier goes bankrupt, any unpaid claims are reimbursed by the state guarantee associations, which are funded by assessments on the remaining solvent insurance carriers. This assessment creates a spiraling risk concern for the remaining carriers because most states assess the surviv- ing carriers on the percentage of the numbers of policies are being dropped, the remaining carriers carry a much larger financial risk with no additional premium or profit potential. Although some insurance carriers had already begun to withdrawal from the Atlantic coastline, 2011's Hurricane Irene underlined the amount of destruc- tion possible along the Eastern the winds and the waves are more destructive. The race by insurance carriers to withdrawal from such areas has intensi- fied because no CEO wants to explain to his stockholders that the risk of financial loss has increased while the rate of return on investment has stayed the same. The financial implications of being the last company to remain in a region struck by a hurricane could be cata- strophic to the carrier and shorten the career for the person who failed to with- drawal as quickly as his competitors. The Guarantee Associations that safeguard Virginia, Connecticut, District of Columbia, New Hampshire and Rhode Island have seen 29 insurance carriers go bankrupt since 2005. Although, any claims are usually limited to $300,000 per structure, the amount of money at risk would be astronomically high after a Category 5 storm hit Atlantic coastal states. To limit the cost of serv- icing the claims most states' Guarantee Associations have enacted legislation that will not allow a homeowner or prop- erty owner to sue the guarantee fund for any claims that the insured disputes. This change will greatly hamper those insured who are challenged to prove if the cause of loss was flood or wind- driven rain. What about Floods, or Earthquakes? Another large stakeholder in the financial devastation of a Category 5 storm is FEMA. FEMA administers the national flood program, which is funded 22 STORM&SecURITy PROTecTION / 2012 FORECAST

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