Heading for the hills.As with most of life, being a successful insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. depends on making the right decisions. For homeowners insurers, making the right decisions about risky coastal properties isn't getting any easier. Since the devastation resulting from Hurricane Andrew This article is about the 1992 hurricane; there was also a Tropical Storm Andrew during the 1986 Atlantic hurricane season. Hurricane Andrew is the second-most-destructive hurricane in U.S. history, and the last of three Category 5 hurricanes that made U.S. in 1992, insurers have been forced to reconsider re·con·sid·er v. re·con·sid·ered, re·con·sid·er·ing, re·con·sid·ers v.tr. 1. To consider again, especially with intent to alter or modify a previous decision. 2. how they handle their coastal exposures, and the choices are many. "Home of the Brave," our cover story beginning on page 20, explains that some have chosen to spread their coverage more sparsely sparse adj. spars·er, spars·est Occurring, growing, or settled at widely spaced intervals; not thick or dense. [Latin sparsus, past participle of spargere, to scatter. , raise deductibles, change the way they calculate deductibles, or employ other strategies to minimize risk, but they're staying in the market. Others are literally taking the high road and no longer insuring coastal properties at all. Consequently, the residual market in many states has grown significantly. In Florida, which was pummeled by four hurricanes in six weeks this year, several different strategies have enabled most insurers to hold their ground. "We've lost only one company to rehabilitation rehabilitation: see physical therapy. , and we've seen only one company limit the issuance of new policies," said Guy Marvin, president of the Florida Insurance Council. The Florida Hurricane Catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). Fund, created in 1993; Citizens Property Insurance Corp., Florida's residual market formed from the merger of other entities in 2002; and the standard market's use of percentage deductibles on a per-occurrence basis have all contributed to Florida's insurance stability following the recent catastrophe, Marvin said. "After Andrew, we studied a number of recommendations, and we believe it is in large part because of those changes that the market is in much better shape," he said. The big lesson learned this year, however, is that even those insurers who have pulled back aren't safe. "We don't look at it as just a coastal problem anymore," Marvin said. "We didn't think a hurricane could travel across land and maintain the force that Charley did. This has caused all of us to rethink re·think tr. & intr.v. re·thought , re·think·ing, re·thinks To reconsider (something) or to involve oneself in reconsideration. re the models we'll be using in the future and adjust them for what is a newly recognized threat." Changes in regulation also may be necessary, "but we need to consider whether our reactions are purely emotional before making changes," Marvin said. Sally Whitney is editor. You may reach her at (908) 4392200, Ext. 5340, by writing to A.M. Best Co., Ambest Road, Oldwick, NJ 08858, or by e-mail at sally.whitney@ambest.com. The e-mail address See Internet address. e-mail address - electronic mail address for Best's Review is bestreview@ambest.com. |
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