COLORADO SPRINGS, Colo. — Two weeks after Hurricane Ian hit, insurers are evaluating how the storm will affect their own books and the broader market but expect property prices and possibly prices in other lines to rise more sharply in future renewals.
Property insurance costs, which were already expected to rise before the Category 4 hurricane hit Florida’s Gulf Coast on Sept. 28, will be driven up by rising reinsurance costs, among other factors, but it remains unclear which parts of the market will be most affected by the deadly storm, insurers said and brokers who met at the Insurance Leadership Forum in Colorado Springs this week.
Organized annually by the Washington-based Council of Insurance Agents & Brokers, the conference is an important market meeting and attracts top executives from insurance companies, brokers, reinsurers and other industry firms.
While executives said Hurricane Ian̵7;s losses — which several modelers peg at more than $50 billion and as high as $74 billion — will disrupt the market, the business areas that would be most affected were discussed in private meetings at the conference at the Broadmoor Resort.
Ian, which included significant levels of flooding due to significant storm surge, is expected to be a major loss for auto insurers and for marine insurers. Property insurers also expect large losses, but windstorm deductibles in Florida are high, often in the tens of thousands of dollars, which can limit insured losses for newer structures that were damaged by the storm but are not total losses, insurers and brokers say.
Additionally, while there are expected to be significant commercial property claims, Ian’s road hit residential areas harder. And while commercial policies, unlike many Florida homeowners, often include flood coverage, it’s often limited, as are windstorm exposures.
“Speaking on behalf of our commercial book, we think it’s actually going to be a pretty manageable event,” said Jonathon Drummond, Chicago-based head of North America for Willis Towers Watson PLC.
But insurers that don’t suffer big losses from the storm could see their reinsurance costs rise, he said.
“Every carrier is concerned about the downstream impact of this, which means all reinsurers and retrocessional reinsurers will be affected,” Drummond said.
Commercial properties were affected by the storm, but many of the losses from Ian will be covered by the National Flood Insurance Program or uninsured or not covered in the standard property/casualty market, said Paul Smith, Parsippany, New Jersey-based senior vice president, carrier relations, at HW Kaufman Financial Group Inc.
“There’s going to be an awful lot of loss of physical damage to the car, and there’s going to be a lot of marine loss associated with that as well,” Smith said.
Kevin Smith, president of global risk solutions, North America, at Liberty Mutual Insurance Co., said the storm will have a broad impact on the market.
“It was clearly a homeowner event, clearly an automotive event, but I think there was enough destruction that you’re going to have some consequences on the commercial side as well,” he said.
While insurers are still evaluating their exposure to Ian, “it makes an already difficult Jan. 1 even more difficult,” said Mike Kerner, CEO of Munich Re Specialty Insurance, a Princeton, New Jersey-based unit of Munich Reinsurance Co.
Ian will clearly affect the insurance market in the Southeast, but whether it will have a serious effect on renewals elsewhere will depend on whether the storm only cuts into insurers’ profits or if they also take a hit to their capital, he said.
“If it’s a capital event, you can expect it to have a knock-on effect on other industries. If it’s just a profit event, over the last ten years the industry has demonstrated its ability to target pricing in terms and conditions change where needed and don’t target areas where it’s not needed, says Kerner.
Reinsurers typically have broad coverage agreements with insurers, so higher reinsurance rates are likely to affect insurance rates outside of Florida, said Paul Lavelle, New York-based director of U.S. national accounts in Zurich, North America.
“Even without Ian prices in real estate would probably go up, and this is just an event that cannot be ignored,” he said.