Florida's troubled property insurance market shouldn't feel any ripple effects with higher rates because of the devastating Oklahoma tornado, insurance experts say.
"This is a tornado that occurred in Oklahoma," said Bob Hartwig, an economist and president of the Insurance Information Institute. "This doesn't have any impact on the cost of homeowners insurance in Florida … in the same way that a hurricane in Florida has no impact on the rates in Oklahoma."
Hartwig noted that, by law, rates have to be set based on the cost of doing business in a particular state.
A recurring concern after any major storm is whether it will impact global prices for reinsurance, which refers to added layers of insurance that insurance companies buy to defray the payouts they would have to make after catastrophic events.
Early industry reports estimated insured losses from the Oklahoma storm in the hundreds of millions of dollars, possibly topping $2 billion.
Even at the high range of those estimates, the storm wouldn't be enough to have a noticeable impact on the reinsurance market, Hartwig said. At $2 billion "that's one-twentieth the cost of (Hurricane) Sandy," he noted.
Tornadoes and thunderstorms were the costliest type of natural disaster in 2011 with insured losses topping $25 billion, more than double the previous record, according to the Insurance Information Institute. The total was boosted by two of the costliest tornado events in U.S. history: $7.5 billion in damages from twisters in April 2011 that struck Alabama and other states; and $7 billion from the May 2011 tornado that devastated Joplin, Mo.
Last year, tornadoes and thunderstorms caused about $15 billion in losses.
Oklahoma already ranks among the top five disaster-prone states in the country, though not as high on the list as hurricane-wary states like Louisiana and Florida.
Standard homeowners and business insurance policies cover wind damage to the structure of insured buildings and their contents, if caused by tornadoes or thunderstorms. Typically, damage caused by flooding is not covered unless property owners have bought separate flood policies through the government-run National Flood Insurance Program.
Heading into hurricane season, both insurance industry representatives and consumer advocates have forecast modest increases in property insurance rates among private insurers.
Citizens Property Insurance, the state-run insurer which covers 1.3 million policyholders statewide, has been cutting coverage as it remains restricted by a state mandate to not raise rates more than 10 percent a year on average.
Jeff Harrington can be reached at [email protected]