Insurance Costs Tied To Rising Property Values

Posted Apr 9, 2007 by The Tampa Tribune

Updated Apr 9, 2007 at 03:27 PM

By Neil Johnson
The Tampa Tribune

NEW ORLEANS - A dramatic increase in coastal property values is the force behind increasing insurance rates, an insurance official said Friday.

“The rise in the value of coastal properties is driving the rise in insurance rates, not an increase in the number of storms,” Robert Hartwig, president of the Insurance Information Institute based in New York City, said during the closing session of the annual National Hurricane Conference in New Orleans.

Still, hurricane losses in 2004 and 2005 played a role in the industry’s ratcheting up of rates.

From 1986 through 2005, hurricanes made up half of the nation’s insurance claims. In the previous 20 years, tornadoes were the largest source of insurance losses.

Seven of the nation’s10 most costly hurricanes occurred between August 2004 and October of 2005 with hurricane’s Katrina, Wilma, Rita and Dennis adding 3.3 million insurance claims to the 2.25 million filed in 2004,  Hartwig said.

The value of coastal homes and businesses is $7 trillion from Texas to Maine, the states vulnerable to hurricanes.

In Florida, coastal property values are $2 trillion, making up 79 percent of the state’s insured value and are expected to double by 2014, he said.

Hartwig said the return on equity, a measure of profit, for insurance companies covering Florida have ranged from the middle teens to low single digits.

The week-long annual national conference ended on Friday. It drew more than 1,700 delegates, mostly from emergency management, law enforcement, federal and state agencies and hurricane experts.