More storms predicted, insurers in disarray -- yep, hurricane season must not be far off

11

March

Hurricanecharleydowntownpuntagordaarriepratt Wake up and good morning. Weather forecasters are already gearing up with forecasts of an active hurricane season this year -- forecasts perhaps given more validity given El Nino and Florida's bizarrely cold winter temperatures -- and prompting early worries about the state property insurance market. Hurricane season starts June 1.

Are we ready for a Big One? (Above photo: Downtown Punta Gorda Professional Center after Hurricane Charley in 2004, by Carrie Pratt of the St. Petersburg Times.)

Meteorologists predict "above-normal" threats on the U.S. coastline. First out of the box this week is weather forecaster Joe Bastardi of the AccuWeather.com Hurricane Center, who yesterday predicted seven landfalls. Five will be hurricanes and two or three of the hurricanes will be major U.S. landfalls. Says Bastardi:"This year has the chance to be an extreme season. There will be a major bounce back of activity."

Here's one story and another here on Bastardi and the forecaster scene. Now this may be as on target as estimating fleas on a dog in the dark, but the insurance industry is already worried (when is the insurance industry not worried?) because of other expensive catastrophes -- from Chile's earthquake to European storm Xynthia -- that are starting to tap the reinsurance market. That's the group of reinsurers whose business is to insure insurance companies, like the ones who insure Florida homes.

A Dow Jones/Wall Street Journal story headline sums it up nicely: Insurers Brace For Disaster Impact On 2010 Earnings. What's so surreal in Florida is that last year was the lightest hurricane season with the fewest storms since 1997. And yet the property insurance market remains a mess with State Farm (after threatening to leave the state) cutting back its coverage dramatically and a crop of much smaller Florida insurance companies struggling with low capital levels and weak balance sheets.

HurricaneandrewlawtonchileshomesteadamageAP Let's not forget a Florida state government that only a few years told us insurance rates would "drop like a rock" here. That never happened. But some legislators now are busy trying to push through legislation that would effectively gut state regulation of insurance rates and let insurers charge what they want in the market. Talk about whipsawing the Florida public. (Photo, right: Former Florida Gov. Lawton Chiles surveys damage from 1992 Hurricane Andrew in Homestead, Fla., by AP.)

A recent special report by Sarasota Herald-Tribune reporter Paige St. John finds millions of Floridians "now bet their homes on property insurers that teeter on the edge of financial failure." It's worth a closer look here.

So let's add this up. Forecasters fear more storms this year. Insurers already say they are pressed by global catastrophe claims. Tallahassee seems to have surrendered even more to insurance lobbyists seeking more freedom to charge ever-higher insurance rates. And many insurers today are too highly leveraged and are at risk of not honoring their policies should a Big One Hit.

Yep. Sounds like another pre-hurricane season in the Sunshine State.

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 12:27pm]

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