Don Brown

Insurance Journal
Editorial
June 6, 2011

Florida Gov. Rick Scott signed into law legislation that promises to lower costs for the state’s property insurers, including what they pay on sinkhole claims. Scott said the bill (SB 408) “strengthens Florida’s property insurance market by addressing cost drivers associated with burdensome regulations, and confronting the sinkhole crisis.”

The legislation was sponsored by Sen. Garrett Richter (R-Naples) and Rep. John Wood (R-Haines City). It passed the Senate 26-11 and the House 85-33 and took effect upon signing.

The new law limits sinkhole losses, changes the holdback provisions on dwelling and contents coverage, places a statute-of-limitations on sinkhole and hurricane claims, and caps public adjusters’ compensation. A summary of some of the key provisions of the new law prepared by the Legislature follows.

Time Limits, Statute of Limitations

The bill places time limits for bringing a hurricane or sinkhole claim and also creates a statute of limitations for bringing a breach of contract property insurance action in court. A claim, supplemental claim, or reopened windstorm or hurricane claim must be given to the insurer within 3 years after the hurricane first makes landfall or the windstorm causes covered damage. An initial, supplemental or reopened sinkhole claim must be given to the insurer within 2 years after the policyholder knew or reasonably should have known about the sinkhole loss. The bill also enacts a 5-year statute of limitations for bringing an action for the breach of a property insurance contract that runs from the date of loss.

Public Adjusters

The bill limits public adjuster fees related to reopened or supplemental claims to a maximum of 20 percent of the reopened or supplemental claim payment. The bill also limits public adjuster fees to 20 percent of an insurance claim payment made by the insurer more than one year after events that are the subject of a declaration of a state of emergency by the governor. A public adjuster fee related to a policy issued by Citizens Property Insurance Corp. may not exceed 10 percent of the additional amount actually paid in excess of the amount originally offered by Citizens on the claim.

Rate Standards

The bill requires property insurance rate filings to be submitted via the “file and use” method until May 1, 2012 and receive approval from the Office of Insurance Regulation before implementing the insurer’s proposed rate. Residential property insurers are authorized to make a separate rate filing limited solely to an adjustment of its rates for reinsurance and financing products used as a replacement for reinsurance. The rate filing may not result in a premium increase of more than 15 percent for an individual policyholder and must be approved or disapproved by the Office of Insurance Regulation within 45 days.

Citizens Property Insurance Corp.

As of January 1, 2012, Citizens must require agents to obtain from applicants for coverage a signed Acknowledgment of Potential Surcharge and Assessment Liability form. The form details that Citizens policyholders are subject to a Citizens policyholder surcharge of up to 45 percent of premium and emergency assessments.

Citizens policies issued or renewed on or after January 1, 2012, which cover sinkhole loss may not include coverage for losses to appurtenant structures, sidewalks, decks, or patios that are caused by sinkhole activity.

Replacement Cost Coverage

The bill modifies how insurers must pay dwelling or personal property losses on a replacement cost basis. For a dwelling loss, the insurer must initially pay the actual cash value, minus the deductible. Subsequently the insurer must pay any amounts necessary to perform repairs as work is performed. If a total loss of a dwelling occurs, the insurer must pay the entire replacement cost coverage without holdback of depreciation in value pursuant to the Valued Policy Law.

For personal property losses insured on a replacement cost basis, the insurer must offer two claim payment options. The first option requires the insurer to pay the replacement cost without holdback of depreciation, regardless of whether the insured replaces the property. The second option allows the insurer to limit the initial payment to the actual cash value of the personal property to be replaced. To receive payment from the insurer for the full replacement value of the personal property, the insured must provide a receipt for the replaced property to the insurer.

Sinkhole and Catastrophic Ground Cover Collapse Insurance

The bill authorizes insurers to restrict catastrophic ground cover collapse and sinkhole loss coverage to the principal building as defined in the insurance policy. The bill also allows an insurer to require a property inspection prior to issuing sinkhole loss coverage.

http://www.insurancejournal.com/magazines/mag-features/2011/06/06/201143.htm

InsuranceNewsNet.com
by Diana Rosenberg
June 6, 2011

With hurricane season under way, the property insurance market in Florida is as unstable as it was in the wake of Hurricane Andrew in 1992, said Robert Ritchie, president and chief executive officer of American Integrity Insurance Group.

“The reason that I feel we’re at this point is because we have allowed the rate adequacy to languish. We have allowed for certain competitors to initially write business at insufficient rates,” Ritchie said. “So the ability for the private market, even those of us that are domestic and committed to Florida, is very fragile.”

Ritchie also pointed to noncatastrophe cost drivers, including sinkhole claims and a 2007 law requiring insurers to make full replacement cost coverage up front, which insurers have long said leads them to pay for repairs that are often never made or contents that are never replaced, with the insurance proceeds going for things such as paying down mortgages.

Legislation signed by Gov. Rick Scott last month restores mandatory hold-back language for dwellings, but not contents (BestWire, May 18, 2011). The new law also raises the minimum surplus requirements for residential property insurers; shortens the time frame for filing windstorm and hurricane claims to three years and sinkhole loss claims to two years; provides a more precise definition of a sinkhole; and places limits on public adjuster compensation.

“While it’s a noble start, it is woefully inadequate,” Ritchie said of the new law. “At the end of the day, we were out lobbied by the trial bar, by public adjusters, and by many people that have created a cottage industry that have created a hidden tax for the rest of Floridians because rate increases, even without a hurricane, will continue.”

Florida needs to take some “tough medicine” to restore the health of the property market, and a key part of that is restoring Citizens Property Insurance Corp. to its original mandate of insurer of last resort, Ritchie said.

“I personally believe that Citizens will reach two million households or policies before any real reform is tackled,” Ritchie said.

Citizens’ policyholder count has continued to swell and it is now the state’s largest insurer by market share. As of April 30, Citizens had some 1.3 million policies in force. In the recently concluded legislative session, lawmakers failed to approve legislation that sought to shrink Citizens by allowing the company to increase residential policyholders’ rates by up to 25% and restricting high-value homeowners from purchasing insurance from the state-run insurer (BestWire, March 9, 2011).

The companies with the largest market share in the Florida homeowners’ multiperil market in 2010 were: Citizens Property Insurance Corp., with a 16.7% market share; State Farm Group, with 14.15%; Universal Insurance Holdings Group, with 8.71%; USAA Group, with 5.06%; and St. Johns Insurance Co. Inc., with 3.58%, according to BestLink, which provides online access to A.M. Best’s database of insurance information.

American Integrity, based in Tampa, has a 1.02% market share in Florida, according to BestLink.

To hear the entire interview with Ritchie, visit http://www.ambest.com/media/media.asp?RC=187727.

http://insurancenewsnet.com/article.aspx?id=264049&type=newswires

The Daytona Beach News-Journal
by Robert F. Sanchez
June 5, 2011

The Atlantic hurricane season officially began on June 1, and once again the weather experts are forecasting a very active season, with more major storms than in a typical year. What the experts cannot precisely forecast is whether Florida will be in the path of any of these storms.

On the other hand, experts who have studied Florida’s property insurance market are fully able to forecast precisely what could happen if one big storm or a series of lesser storms were to strike this vulnerable peninsula: It would cause a financial disaster.

Here’s why: With a politically manipulated regulatory climate having caused several large national property insurers to reduce their exposure in Florida, the government-operated Citizens Property Insurance — initially formed to be the state’s “insurer of last resort” — has become the state’s largest property insurer.

Unfortunately, if storm damage were widespread, Citizens would not have enough money on hand to reimburse all of its clients for their losses, and neither would it have enough reinsurance — which is insurance for insurers — to cover all of the losses.

To pay its claims then, Citizens would need hastily to borrow billions of dollars. It would pledge to repay these loans by imposing surcharges — really taxes by another name — on every Florida property insurance policy and auto insurance policy. That could amount to one of the largest single tax hikes in Florida history.

The state would have no alternative, though, because failing to pay the claims would be disastrous for Floridians who had counted on Citizens’ coverage, and failing to repay the borrowed money would destroy Florida’s carefully cultivated credit rating, which allows the state to borrow at favorable interest rates.

The 2011 Legislature did accomplish some helpful reforms concerning property insurance, including a phased-in crackdown on the rampant fraud and abuse associated with homeowners’ bogus claims of sinkhole damage.

Yet the state’s vulnerable position with respect to Citizens looms as a much more significant problem, so perhaps it would be helpful to note what the 2011 Legislature did to address this problem. It can be summed up in four words: Nothing. Zero. Zilch. Nada.

Former Gov. Charlie Crist’s populist policies arguably contributed to the regulatory climate that caused so many major insurers to flee the state, so we wouldn’t want his successor to emulate his policies. However, given the Legislature’s inaction on Citizens, there is one Crist gesture that he might emulate.

In 2007, Governor Crist’s first year in office, he took part in a trade mission to Israel. While in Jerusalem he went to the Western Wall and inserted a note with a prayer that by his own account read, “Dear God, please protect our Florida from storms and other difficulties. Charlie.”

Some will attribute Florida’s lack of significant storm damage in recent years to the governor’s prayer, and others will attribute it to sheer luck, which can be interpreted as shorthand for the seeming randomness of natural disasters. As the saying goes, the rain falls on the just and the unjust. Tornadoes, too.

Sadly, however, whether one has faith in prayer or in Florida’s continuing good luck, those forces may be the only hope left for Floridians as this storm season approaches since lawmakers failed to reform Citizens, leaving it a glaring exception to free-market principles and a fiscal disaster waiting to happen.

http://www.news-journalonline.com/opinion/editorials/other-voices/2011/06/05/storms-could-topple-citizens-insurance.html

PropertyCasualty360.com
by Chad Hemenway
June 2, 2011

Forecasters say Florida is the most likely state to get a hurricane landfall, and storm activity is supposed to be above normal, putting all property insurers in this extremely volatile market on notice.

“It is hard to say,” answers Insurance Commissioner Kevin McCarty when asked how many of the state’s insurers will be in financial trouble if the forecasts are right. “It depends on whether it’s one event—how severe it is. Or will it be a series of events? What is the company’s reinsurance [and] reinstatements?”

“Some have high retentions,” he tells NU Online News Service. “Their survival is questionable.”

The Atlantic hurricane season began June 1. The Sunshine State has not been affected by a hurricane for several years. But it may not take a storm to push some teetering property insurers to the brink of collapse.

“This year will be a turning point for a few, and for more depending on the weather,” McCarty predicts.

He says three to five insurers, irrespective of hurricanes, will leave Florida this year. This is no revelation. The commissioner says he has been telling state officials this for some time, as the Office of Insurance Regulation (OIR) was “very active in promoting legislative change” in 2011, he adds.

“They aren’t able to secure [reinsurance] coverage,” McCarty says of insurers. “There will be winners and losers in Bermuda.”

Reinsurance costs was one of a handful of so-called “cost drivers” McCarty identified after speaking with the state’s insurers, many of whom have reported underwriting losses in years without hurricanes.

The industry looked to this year’s Legislative Session to cure some of the ills and wound up with SB 408.

“It’s a very good first step,” McCarty says. “Is it the panacea for the industry? No. But it is good, strong public policy that will help with some of the issues plaguing our companies.”

Since insurers buy reinsurance just as the hurricane season starts, insurers had long looked for an expedited way to recoup the costs because by the time companies were able to make a filing and get it approved, they had missed half the year to collect premiums.

SB 408 allows for a streamlined filing. McCarty’s office must look at the filing within 45 days, not 90.

“It will still be reviewed in the same manner,” he explains. “But this way is more reflective of reality.”

The law also requires insurers to carry $15 million of surplus, not the old standard of $5 million. Companies already operating in the state get 10 years to get to the new minimum.

Currently seven companies in Florida operate with a surplus under $6 million, McCarty says. The new minimum of $15 million, as well as other factors, will likely spur some merger and acquisition activity, he adds.

Via SB 408 insurers also get some relief when it comes to compensation for public adjusters, defining a sinkhole claim, replacement costs, and a shorter timeframe for policyholders to file a claim after a storm.

Citizens Property Insurance Corp., the state-run insurer, benefits from some of the language in the bill about public adjusters and it will be able to charge additional rates for sinkhole coverage. However, nothing was done to modify the rate plan of Citizens, which has long-eclipsed its intended purpose of being the last-resort insurer.

Citizens has become the largest writer of property insurance in the state, as rates from private companies have crept ahead of Citizens over the years.

“This is simply not sustainable,” McCarty says. “It prevents companies from deploying capital they have in Florida.”

Companies have applied for and taken less rate increases in order to prevent pricing themselves out of the market, especially since Citizens offers a lower rate, he adds.

Therefore, even with reforms in SB 408, “money is sitting on the sidelines,” McCarty adds, as companies observe the market. Whether SB 408 will attract any new players to the property insurance market “remains to be seen,” he said.

Competition from Citizens, and the potential for insurers to be assessed to pay the state-run insurer’s claims following a significant storm, is keeping private insurers away.

“These facts are something I need to be very candid about when I speak to companies about our market,” McCarty says.

http://www.propertycasualty360.com/2011/06/02/mccarty-fla-insurance-law-fixes-some-things-but-bi

WFSU News
by Lynn Hatter
June 1, 2011

TALLAHASSEE, FL (wfsu) – This week marks the start of hurricane season and as Floridians make the dash to the nearest store to stock up on essentials like canned foods, water and tarps, the state has been prepping too. Florida’s property insurer has been increasing its on-hand cash and the reserve fund has more money in it now than ever, but as Lynn Hatter reports, all that money may not be enough if the “big one” hits.

Back in 2004 and 2005, when the state suffered through eight hurricanes, Citizens Property Insurance was still relatively small, and there were plenty of other companies in Florida to absorb the damage that year. Citizens Chief Financial Officer Sharon Binnun, says a lot has changed since then.

“Citizens share was just over 6-billion dollars. So Citizens back, five years ago, had far less resources readily available to it. It also didn’t have as much developed infrastructure with respect to corporate governance, claims adjustment and deployment resources.”

Since that time, other insurers have left the state, causing Citizens to go from the insurer of last resort to the insurer of first and in some places, only, choice. And as a result, the company has had to boost the amount of money it has on hand.

“Citizens has between all of its resources, in excess of 15-billion dollars that would be available to pay claims. And the most extreme event could be losses in excess of that dollar amount, but those are resources that we have readily available. So we feel comfortable that we have adequate resources and that we can issue checks so people can repair their properties.”

Part of that 15-billion dollars is coming from the Florida Hurricane Catastrophe Fund. It’s the re-insurer in case losses from potential hurricanes lead companies to run out of money. The CAT fund is sitting on about 7.25-billion in cash to pay claims. Its administrator, Jack Nicholson, says the jury is still out on whether that’s actually enough money.

“I think we’re doing fair. I’m not going to say good or excellent at this point, because what’s going on with Wall Street, things can change pretty quickly. So, today, we’re in good shape, but if we had a hurricane loss this season, we would more than likely not have to issue any debt for 6-9 months down the road, and it’s hard to predict that far down the road what the financial markets will be.”

The CAT fund can borrow up to another 12-billion in case it runs out of cash, but what it gets depends on how the markets are faring. Meanwhile, the state does have a limit on the amount of damage: the magic number is 15-billion dollars.

“If you were looking at a number, like large a storm we have to have before the CAT fund triggers? It’s about 7.4-billion. How large a storm we need to wipe out the cash balance? That would be about a 15-billion dollar storm, and the probability of that occurring is 5.4-percent. And wiping out the CAT fund is about two – percent.”

The last big hurricanes were in 2004 and 2005, with Francis, Charlie, Ivan and Wilma. Together, they did more than 30-billion dollars in property damage. Right now most people in the state are still paying for those claims in the form of assessments on other insurance policies, which will continue until 2016. And if another hurricane hits and both Citizens and the CAT fund have to borrow more money, those assessments could rise by another 10-percent.

http://www.publicbroadcasting.net/wfsu/news.newsmain/article/5/0/1810421/Business/Can.Florida.bear.the.financial.costs.of.a.hurricane.Maybe..maybe.not

InsuranceNewsNet.com
by Diana Rosenberg
June 1, 2011

As property owners and insurers await the June 1 start of hurricane season, a new law designed to address noncatastrophe cost drivers is a good incremental step to restoring the health of the property-insurance market in Florida, but “certainly more work is needed,” said American Strategic Insurance President and Chief Executive Officer John Auer.

The legislation, signed into law by Gov. Rick Scott earlier this month (BestWeek, May 18, 2011) raises the minimum surplus requirements for residential property insurers; shortens the time frame for filing windstorm and hurricane claims to three years and sinkhole loss claims to two years; provides a more precise definition of a sinkhole; places limits on public adjuster compensation; and restores the replacement-cost holdback provision for dwelling coverage, among other reforms.

“Overall I think the bill addresses a lot of very important areas,” Auer said. “There certainly are other things that can be dealt with too, probably most importantly Citizens Property Insurance Corp. He called the lawmakers’ failure to pass a bill designed to shrink Citizens (BestWire, May 12, 2011) and allow the state-run insurer to raise rates above its current 10% cap “unfortunate.”

“As we sit currently, far too much risk is being borne by the taxpayers of Florida, through a combination of both Citizens and the Florida Hurricane Catastrophe Fund,” Auer said. “For years Florida has been only one major hurricane away from fiscal crisis. The current system requires all Floridians to pay hurricane taxes to subsidize million dollar beach homes on Florida’s coast.”

Auer wants Citizens, which has ballooned to become the state’s largest insurer by market share, returned to its original mandate of insurer of last resort.

As for the new hurricane-modeling software from Risk Management Solutions Inc., Auer said he is “pretty frustrated with the magnitude of the change.”

RMS released a more sophisticated version of its model in February (BestWire, Feb. 28, 2011) which incorporates greater risk for inland areas and increases the probable maximum loss for some carriers. In a May 16 Special Report on the U.S. property/casualty industry, A.M. Best analysts said that the release of RMS version 11, along with first-quarter catastrophe losses sustained by global reinsurers, could result in primary insurers facing higher reinsurance costs at the upcoming July 1 renewals.

Auer acknowledged ASI will need to make adjustments because of the new model.

“We’re purchasing more limit,” Auer said. “We end up paying more for the various layers that we do buy, so both of those changes will necessarily lead to rate increases. They also affect our optimum spread of business, which will affect where we want to write business and how much rate we have to charge in various areas.”

St. Petersburg-based ASI, which currently has about 300,000 policies in Florida, continues to expand beyond the Sunshine State. It now writes in 14 states, including Texas, Louisiana and South Carolina, as well as Washington, D.C. The company is licensed in 24 states, and is in the process of applying for licenses in an additional four states.

The American Strategic Insurance Group currently has a Best’s Financial Strength Rating of A- (Excellent).

The companies with the largest market share in the Florida homeowners’ multiperil market in 2010 were: Citizens Property Insurance Corp., with a 16.7% market share; State Farm Group, with 14.15%; Universal Insurance Holdings Group, with 8.71%; USAA Group, with 5.06%; and St. Johns Insurance Co. Inc., with 3.58%, according to BestLink, which provides online access to A.M. Best’s database of insurance information. ASI Group has a 3.12% market share in Florida, according to BestLink.

http://insurancenewsnet.com/article.aspx?id=263564&type=propertycasualty

The Florida Times Union
Editorial
June 1, 2011

Property insurance reform was a major issue during Florida’s 2011 legislative session.

No surprise there.

It has been an issue, to one degree or another, at least since 1992 – when Hurricane Andrew ripped through South Florida, leaving about $16 billion in insured damage.

Each solution, unfortunately, seems to have created its own new set of problems.

Insurance companies wanted higher rates to recoup their losses. When consumer-oriented regulators wouldn’t allow as much as they said they needed, some stopped selling policies.

Many property owners, unable to buy policies on the open market, turned to state-run Citizens Property Insurance Corp. Citizens, designed to be the insurer of last resort, has become the largest property insurer in Florida.

Also, the state – trying to entice insurers not to abandon Florida – has been selling a lot of low-cost reinsurance policies to private insurance companies. That puts the state’s budget at even greater risk.

Senate Bill 408, passed during the session and recently signed by Gov. Rick Scott, won’t solve all of the problems. But it is a step forward.

According to a Florida Senate staff analysis, it increases minimum surplus requirements. That will help ensure that companies can pay claims when hurricanes strike.

Also, it requires private insurance companies to buy more reinsurance on the open market.

And it’s designed to fight sinkhole claim fraud.

This new law has its critics – principally because it means rates, already going up, will increase even more.

But, unless the private sector is liable for more of the storm damage losses, the next hurricane will put tremendous upward pressure on taxes.

Besides, it doesn’t make sense for all Floridians to subsidize insurance premiums on coastal residences.

Let’s give this new system a chance to work – and tweak it, if need be, in a couple of years.

The hurricane problem cannot ever be solved, but the risk can be managed. And the best way would be to encourage competition in the private sector.

http://jacksonville.com/opinion/editorials/2011-06-01/story/property-insurance-reform-still-necessary

The Tallahassee Democrat
by Don Brown
June 1, 2011

As most Floridians know, the annual Atlantic hurricane season is almost upon us. This is a fact of life in our beautiful peninsula.However, for decades most of us have deluded ourselves about the financial risks of living in paradise, suppressing insurance and reinsurance prices and relying on risky borrowing rather than sound investments to prepare financially for our inevitable storms.

Thankfully, there may be light at the end of this storm tunnel, as an increasing number of Florida’s leaders have begun to consider sensible reform of our Hurricane Catastrophe Fund (Cat Fund) and Citizens Property Insurance Corp.

Last week, Cat Fund Chief Operating Officer Jack Nicholson, for whom I have the upmost respect, wisely suggested to the Cat Fund advisory council that the time has come for it to more appropriately align the Cat Fund’s coverage obligations with its funding potential. This will require a realistic restructuring, given financial market volatility.

Among other ideas, such restructuring would include reducing the mandatory coverage layer of the Cat Fund by $5 billion over a three-year period. It is necessary to phase in changes so as not to disrupt the market.

A reduction in the mandatory layer, which would more accurately reflect our ability to borrow, would have some upward pressure on rates, but that is the hard reality — and at the very heart of our problem.

Why are these overdue reforms so necessary? One reason is that, based upon dynamic changes in the financial markets, the Cat Fund recently revealed that it is only marginally able to meet its total claims-paying obligation for one season.

Any expectation of coverage for second-season events, and maybe subsequent events in the same season, is pie in the sky. Even that glass-half-full estimate aggressively assumes the Cat Fund can pull off a historical record sale of some $11 billion of bonds while our state suffers in the aftermath of a large hurricane, not to mention that Citizens and the Florida Insurance Guaranty Association may be in the financial markets borrowing at the same time.

One of the Cat Fund’s advisers estimates that borrowing capacity is really closer to $4 billion, much less than the $11 billion “best case” estimate.

For too long we have been fooling ourselves and Florida homeowners into thinking that if we ignore this problem it will go away. In the meantime, consumers, deprived of the correct pricing signals, continue to build beyond their means and, in some cases, in very dangerous places.

It’s not just folks who build on the beach; it’s also folks who live in Orlando, for instance, and divvy up their monthly mortgage and insurance budgets based on real mortgage costs but imaginary insurance cost. We don’t do anyone a service when we mislead them.

Let me ask a rhetorical question. Actually it is a trick question.

How much do you believe the next $50 billion storm will cost Floridians?

The correct answer is not real complicated. You see it doesn’t make a flip what the governor may say from the statehouse steps. The Legislature can pass new “consumer friendly” laws until the cows come home. The Office of Insurance Regulation can refuse to grant actuarially sound rate filings until kingdom come.

But the bottom line is that, when the next $50 billion storm hits Florida, somebody is going to pay $50 billion.

If insurance companies, deprived of adequate rates, go broke, then homeowners will have to pay it. If homeowners don’t have enough money in their pockets to pay, then it will be reflected as a reduction in their net worth. Nobody should be fooling anybody — it will cost somebody $50 billion.

When are we going to realize insurance and insurance companies are not the problem? The cost of hurricanes, human behavior — taking more risk than we can afford — and the government’s absolute insistence on misleading consumers about the “real” cost of living in paradise, that’s the problem.

Citizens’ rates need to be higher, much higher. This is a documented fact. Citizens’ own actuaries have testified under oath that their rates are not actuarially sound.

We need to listen to Nicholson’s advice. The Cat Fund needs to be adjusted to more accurately reflect its original goal of contributing to a stable insurance market in Florida. It should not be tortured beyond all reasonable limits and beyond its ability to perform.

If that causes some pain, then I can only suggest that, if we do nothing, it will be far more painful when Florida homeowners begin paying 30 years’ worth of bond debt they were never told about. If that happens, somebody’s head is going to roll, and I will be the last one to say, “I told you so!”

http://www.tallahassee.com/article/20110531/OPINION05/105310306/Don-Brown-It-s-time-Floridians-pay-the-true-cost-of-insurance

Bloomberg BusinessWeek
by Brian K. Sullivan
May 31, 2011

May 31 (Bloomberg) — The last time a major hurricane hit the U.S., pounding beaches and towns with winds of more than 111 mile per hour, was the record storm year of 2005.

“We have never gone six” years without a major strike, said Dennis Feltgen, spokesman for the National Hurricane Center in Miami. “That is a record I would like to establish, but that’s not up to me, but up to nature.”

In 2005, which saw 15 hurricanes and seven major storms of Category 3 or higher, Katrina struck near New Orleans, killing at least 1,836 people. Katrina and Rita caused $91 billion in damage, destroyed 115 energy platforms in the Gulf and shut down 95 percent of Gulf oil production and almost 30 percent of U.S. refining capacity, according to government reports.

As the 2011 season opens tomorrow, forecasts call for the Atlantic to be more active than in an average year, which produces 11 named storms. The Atlantic has a 65 percent chance of producing 12 to 18 storms, with six to 10 of them becoming hurricanes, according to the U.S. Climate Prediction Center.

The last hurricane to hit the U.S. was Ike, a Category 2 storm, in 2008. There hasn’t been a three-year period without a U.S. hurricane strike since the 1860s, according to Andover, Massachusetts-based Weather Services International, a software maker owned by the Weather Channel.

Planet’s Worst Storms

Hurricanes are the most powerful and destructive storms on the planet, inflicting $152.4 billion in insured losses in the U.S. from 1990 to 2009 and accounting for 45.2 percent of the country’s catastrophic losses in the same time period, according to the Insurance Information Institute in New York.

This year, the industry may be under greater strain because of large losses inflicted by record-setting tornadoes that have killed more than 500 people and destroyed at least $3 billion to $6.5 billion of insured property, said Robert Hartwig, president and economist for the insurance institute.

Hurricanes, which are most active during the six-month season than runs from June 1 through Nov. 30, are a threat to Florida orange growers, who produce the second-largest crops behind Brazil, and Gulf of Mexico oil and gas platforms and refineries. The Gulf accounts for 31 percent of U.S. oil output and 43 percent of refining capacity.

Last year, while tying for the third-most active season on record, the U.S. was protected from major damage by a trough, or an elongated area of low pressure, that helped keep all the hurricanes and all except one tropical storm from striking the U.S., said Jim Rouiller, a senior energy meteorologist at Planalytics Inc. in Berwyn, Pennsylvania.

Pulling Storms In

The trough is setting up this year across the Mississippi Valley, and if it stays there, it’s “going to act as a magnet to pull these storms into the southeastern U.S. or mid- Atlantic,” Rouiller said.

“We will be faced with a much higher threat of a land- falling hurricane,” Rouiller said.

The position of this year’s Bermuda High, a semi-permanent area of high pressure over the North Atlantic, may also drive storms closer to the U.S., said Paul Pastelok of AccuWeather Inc. in State College, Pennsylvania.

Pastelok said forecasters at AccuWeather believe the high will position itself in such a way that more U.S. land strikes are possible.

Not all forecasters are willing to make that bet.

Tricky Predictions

Predicting where storms will make landfall before they form is virtually impossible, said Feltgen. And Jeff Masters, founder of Weather Underground Inc., said the weather patterns that steer hurricanes can’t be predicted months in advance.

“There is no telling what the steering currents are going to do this year,” Masters said.

The one aspect that all forecasters agree on is that La Nina, the cooling of the Pacific Ocean, won’t be in play. The Australian Bureau of Meteorology declared the La Nina event over and said the Pacific has returned to neutral.

A storm gets a name when its winds reach 39 miles per hour (63 kilometers per hour) and becomes a hurricane when winds hit 74 mph. There are five hurricane categories as classified by the Saffir-Simpson scale, with damage increasing by a factor of four for each step up, according to the hurricane center.

While storm names are recycled every six years, this year will have names that weren’t on the list in 2005, said Feltgen. After that season, five names were retired, among them Katrina, “the most number of storms names we retired in one year,” Feltgen said.

Two names, Igor and Tomas, were retired by the World Meteorological Organization’s hurricane committee last year.

“We’re recycling the Katrina-year names,” said Masters, in Ann Arbor, Michigan. “It has been five years without a major hurricane. You could say were due but that doesn’t increase the odds.”

http://www.businessweek.com/news/2011-05-31/hurricane-season-would-set-record-if-there-s-no-major-u-s-hit.html

Orlando Sentinel
Editorial
May 31, 2011

Images from recent deadly tornadoes in the Midwest are truly heartbreaking — but they should serve as a timely reminder for Floridians.

The people in Missouri and Oklahoma and elsewhere didn’t get a lot of warning before the killer tornadoes came roaring through. People have no time to get their homes properly protected and little time to be sure all family members are in a safe place. Not time to really do anything except hope you are not in the twister’s path.

A horrible tragedy, for way too many families. And a reminder that with the opening of hurricane season just ahead, we have the good fortune of time to properly prepare for what could happen.

To an extent, we actually have months to prepare, since the peak of hurricane season isn’t normally until the middle of August. If a storm heads our way, there are still usually days to prepare, particularly with the excellent forecasting accuracy for location and strength that we’ve seen in recent years.

Floridians would be well served to take advantage of the gift of time. The start of the season is a good time to make sure preparations for your home have been taken care of — shutters, garage door, roof, landscaping.

Just as critically, review your insurance policy. Know what you are covered for, and what your deductible may be.

As the summer wears on, there is usually time to make sure you have provisions on hand in case of storm — things like bottled water, canned goods, propane, batteries. And you have a chance to make sure your important papers are in a safe, dry place.

And, every day, weather forecasters let us know if a storm is forming even thousands of miles away, just so we’ll know to keep an eye on things. Even a couple of days out, the “cone of error” will let us know where a storm is likely to strike.

So we’ll have proper warnings. And a chance to be well prepared. But it is important to start now, while there’s time.

http://www.orlandosentinel.com/news/opinion/os-ed-hurricane-season-053111-20110527,0,3382437.story