State of Coastal Marketplace Post Sandy
The coastal homeowners insurance marketplace on Long Island has been significantly impacted due to hurricane Sandy’s devastation. We do know that many insurance companies are opening their doors again to new homeowners located in coastal areas. Increased cost of reinsurance will likely drive the future appetite of the post Sandy coastal homeowners insurance marketplace. Homes located near the water will be of major concern to homeowners insurance carriers, especially those that have suffered damage from Sandy’s wrath. Here is what is known so far:
-More than 95% of homeowners insurance carriers writing coastal waterfront risks are back
accepting new business.
-Most carriers writing on the South Shore of Nassau & Suffolk counties are
requiring photos of the front, back, and side of the risk before
binding insurance coverage’s
-Homeowners with claims from Sandy are underwritten on a case by case
basis. Many will qualify for a normal homeowners insurance product.
-Underwriters of many insurance companies will take the “big picture” into
account in making an underwriting decision. Major factors include
extent of damage/repairs from Sandy, Household credit, & Pictures of
the risk.
What to Expect in the next 5 years?
-Expect major flood rate increases in the coming years for coastal homeowners. Rate
increases could approach 25% for 3 years consecutively for waterfront flood insurance.
-Total Impact on the Reinsurance market has not yet been realized.
We expect rate increases for Reinsurance contracts that will cause
additional tightening of the coastal insurance and waterfront homeowners insurance marketplace, and ultimately, additional premiums trickling down to consumers in the next few
years.
-Increased cost of Reinsurance contracts will significantly impact
some, if not all, of the following:
*Reduced coverages (especially wind)
*Increased premiums (may take several years for state approval)
*Reduced appetite for coastal risks, especially within 2500ft of
water.
*Reduced commissions for agents.
Sandy’s destruction will ignite major changes in the post-Sandy Coastal Insurance Marketplace. As always, we are committed to staying ahead of the curve and maintaining our competitive advantage for Coastal Insurance and Waterfront Insurance Risks no matter where the market may go.
