Could Tampa Bay be the next New Orleans?

[J Kinkaid]

http://www.palmbeachpost.com/storm/content/state/epaper/2006/07/09/m1a_TAMPA_CANE_0709.html

[bvassmer]

I was just down in Naples, FL, visiting family, and they were telling me about how much trouble everyone in the area is having with getting and/or affording insurance. Many are being forced to not have insurance at all, leaving them at extreme risk.

What is even worse, some areas the property taxes are so high (my family there pays somewhere around $25,000 year!) that people are moving out of the area.

I am not sure what is able to be done, but when an area is so at risk for major damage from a possible hurricane, and all the risk of insuring those areas are so high, I cannot blame the companies for abandoning the area or raising prices.

[Tarmo Tanilsoo]

What is even worse, some areas the property taxes are so high (my family there pays somewhere around $25,000 year!) that people are moving out of the area.
I am lucky that Estonia doesn't have property tax.

It might be something about hurricane risks indeed. Hurricane is probably the last weather event, what insurance company would ever want to have.

[richhorodner]

Tampa Bay area, New Orleans and the Florida Keys have ALWAYS been the three areas most likely to have a hurricane catastrophe; based on surge vulnerability and high population density in surge prone areas.

Most of these insurance companies are making a killing in the long term on the hurricane insurance they sell. For 25 years (1966-1991) they collected premiums based on the liklihood that a hurricane would hit every 7 yrs. or so; and no hurricanes hit. So when Florida got a slew of storms recently , some of these companies had "short-term" losses, and even some smaller ones went bankrupt, because they "used-up" their money pool on investements, multi-million dollar salaries to executives, etc.

But, having one of the strongest lobbies in the state, and few laws prohibiting them from charging whatever they wish, they have raised rates by 100-500% the past few years. Some of the justification for these rate hikes comes from the long range forecasts from Bill Gray, etc. So, even though last year's forecast of 17 storms did not pan out (no hurricane landfallls), the absurd rates they have collected on continue to skyrocket.

My house, for example is located 3 miles inland from the Atlantic Ocean, and is at an elevation of 27 feet. A cat #5 hurricane can put a maximum surge (slosh model calculations) in this area's coast of about 16 feet; so a surge getting here is impossible. Yet, after Hurricanes Jeanne and Frances affected this area in 2004, my insurance company sent out a letter: "Your house has now been determined to be in a high risk tidal surge area, and you have 3 months to obtain coverage from another source." Jeanne and Frances were the first hurricanes to hit near here in several decades; IE, they have collected premiums for 30 years and paid out almost nothing on claims until 2004; and nothing since, either.

Most policies now have an additional caveat: there is a deductible, per incident, of 2% of the total value of the property. Since the average home is worth over $200,000, the average deductible is $4000+.

[Justin Turcotte]

I wouldn't call the insurance a rip off but I understand where you are comming from. The primary insurance companies are insured themselves by reinsurers. Think Lloyds of London. After a major cain the primary insurance company is usually sitting ok since the reinsurer take the biggest hit. In fact, the best time to buy stock in an insurance company is immediately after the storm hits as the stock takes an inital dive on the news then investors are quick to realize big storms mean rates will rise meaning more profit provided another hit doesn't come too soon. You can bet those reinsurers have increased their rates too so the additional price paid by the homeowner isn't totally manifested by greed. Looking at it this way, a tornado will hit any given point in the Plains once in approximately 10,000 years (according to some Doswell stats) while a hurricane will impact the same location of the coast at a far greater frequency, perhaps once every 30-50 years. That makes the home in a hurricane zone 200-300 times more likely to be impacted by destructive winds (all else being equal which is not the case when you factor in thunderstorm wind damage climo). Thinking strictly from a risk standpoint, homeowners in a hurricane prone area should get hosed relative to Joe Blow in Casper, WY or Burlington, VT. There are certain costs no matter where you live. One can enjoy the Florida beaches and pay through those nose for insurance or live cheaply in North Dakota and freeze.

[B Ozanne]

Quite frankly, most people don't understand the insurance business and most of the claims in this thread are unfair.

My stock in a reinsurance company was wiped out after Katrina. Nobody is going to bail me out.

The beauty of capitalism makes most of these rip-off arguments flat out wrong. If there was a market to charge less for insurance then a new company would form and charge less. That competition would drive prices lower.

What most of you are suggesting is socialism. If that's what you want I have a long list of countries you can move to. Government regulation wont make insurance cheaper, any businessman could tell you that. It would limit your choices and drive prices up. Insurance companies are in the business of making money, and that means profits. They aren't charities.

My reinsurance stock made quite a bit of money before Katrina. I think the share value doubled in just a few years as disasters were limited. Cash resserves were very high. Then after the 2005 season it was wiped out. All those retained earnings were lost in two storms.

[B Ozanne]

I am lucky that Estonia doesn't have property tax.


That's irrelevant. Towns in Estonia have the same expenses as towns in America. Instead of property tax you have different taxes that make up the difference.

[Ed Schoenborn]

North Carolina should be considered as risky as Tampa Bay, New Orleans, and the Florida Keys. In 2004 every tropical system that hit Florida also hit North Carolina plus 4 more. If you combined Tampa Bay and the Florida Keys, North Carolina IS one of the top three. Ed

[Jose Garcia]

Quite frankly, most people don't understand the insurance business and most of the claims in this thread are unfair.

My stock in a reinsurance company was wiped out after Katrina. Nobody is going to bail me out.

The beauty of capitalism makes most of these rip-off arguments flat out wrong. If there was a market to charge less for insurance then a new company would form and charge less. That competition would drive prices lower.

What most of you are suggesting is socialism. If that's what you want I have a long list of countries you can move to. Government regulation wont make insurance cheaper, any businessman could tell you that. It would limit your choices and drive prices up. Insurance companies are in the business of making money, and that means profits. They aren't charities.

My reinsurance stock made quite a bit of money before Katrina. I think the share value doubled in just a few years as disasters were limited. Cash resserves were very high. Then after the 2005 season it was wiped out. All those retained earnings were lost in two storms.

I would really like you to not include or expose your political/economical ideas. I do not care if people on this forum are capitalist, socialist, comunist, sociodemocrat or whatever. This thread has deviated a lot from the original topic which was of about the potential of the Tampa Bay area being hit by a major hurricane coming from the W or SW with some really bad effects if that would happen.

Anyway, please respect other people's ideas or way of thinking and if you feel attacked by someone you can PM that person but if you believe in democracy at all, then respect the way of thinking of the rest of the people. I'm here to talk about tropical cyclones and severe weather and I'm fed up with all the childish political stuff that some people say, so lets get back on track with this topic please...

Sincerely,

Jose

[B Ozanne]

I would really like you to not include or expose your political/economical ideas. I do not care if people on this forum are capitalist, socialist, comunist, sociodemocrat or whatever. This thread has deviated a lot from the original topic which was of about the potential of the Tampa Bay area being hit by a major hurricane coming from the W or SW with some really bad effects if that would happen.

Anyway, please respect other people's ideas or way of thinking and if you feel attacked by someone you can PM that person but if you believe in democracy at all, then respect the way of thinking of the rest of the people. I'm here to talk about tropical cyclones and severe weather and I'm fed up with all the childish political stuff that some people say, so lets get back on track with this topic please...

Sincerely,

Jose

Jose, why didn't you go after Rich? He was the one who titled his reply:

Tampa Bay risk and insurance rip-off in general

If somebody made incorrect statements about your business I would expect you to correct them as well. I didn't want to talk about insurance. I'd love to talk about Tamba Bay's hurricane risk. Rich was the one who said insurance companies are a rip-off.

[Jose Garcia]

Hi Bill...

That's why I said in my message that you could PM the person that made the comment that you felt alluded to. But now we can get back to the topic...

Jose

[B Ozanne]

I suppose that article could be re-written for most major cities on the Atlantic or Gulf Coasts.

Hard for people to leave, expensive homes, storm surge threat, etc.

The major difference with New Orleans is that once the storm crosses Florida the water will recede from Tampa Bay.

Statistically, Tampa Bay is not the most hurricane prone city in America. Its in a relatively safe location. Not sure if that is good or bad. It may lead to complacency or poor preparation.