Hermine — $139 million. Matthew — $1.2 billion. Irma — 10.4 billion. Michael — who knows at this stage, but last week’s Category 4 hurricane, the most powerful storm to hit the Florida Panhandle in recorded history, will wind up costing the insurance companies plenty.
Still, Florida’s industry — uniquely dominated by smaller players since the big guys mostly skedaddled following Hurricane Andrew — has the resources to pay Michael claims, as the Insurance Journal reported this week.
We called Joseph Petrelli for his take on the situation. Petrelli is president of Demotech Inc., the Ohio-based ratings firm that oversees books at 52 Florida insurance companies. They include Universal Property & Casuality Insurance Co., which, with more than 9 percent market share, is the most significant player in Florida’s property insurance market.
His bottom line? Notwithstanding the communications challenges in the disaster zone, “so far so good. The industry’s responding — which is what it’s supposed to do.”
The remarks below have been edited for length and clarity.
Florida Politics: Are Florida’s property insurers in good shape to meet their obligations following Hurricane Michael?
Joseph Petrelli: Our companies are. I can’t speak to anyone else, but I think our companies are fine. Like the old Timex commercial — you take a licking and keep on ticking. They’re supposed to pay claims, and that’s how they’re set up.
FP: They’re sufficiently capitalized and reinsured?
JP: The reinsurance is the key. We’re in the process of collecting data, but we don’t expect anybody to push through the top of their reinsurance.
FP: Do see any changes to the marketplace coming out of this?
JP: From our perspective, once the storm season is officially over, sometime in early December, I suspect that for Demotech-rated companies, between the financial impact of Irma and some other storms there in 2017, and Michael in 2018, I suspect there’ll be some downgrades. That doesn’t mean the company‘s in trouble by any stretch of the imagination. It just means they haven’t had time to recapitalize, given two tough, back-to-back years.
FP: How does the rating process work?
JP: We work with companies on an annual basis. We review every quarterly financial statement — end of March, end of June, end of September, and the end of the year. We review their audits. We review their actuarial opinions. We review their preliminary reinsurance programs as to their vertical and horizontal rigor. We review their final reinsurance programs. We review their catastrophe reinsurance response. And we review their disaster recovery program — to name a few things. It’s all based on a 12-month cycle.
FP: Is there anything to look for in a time like this?
JP: From the companies’ perspective, their clients are contacting them. They’re contacting their clients. The companies are all out there making a good-faith effort to do what they’re paid to do.
FP: Any other information that would be germane at this point?
JP: We’re giving the companies some time to go out and see what’s going on. We’ll send out periodic requests for information. But at this point, we’re unaware of any situation where Michael created any financial distress.