Matthew could be a "market changing event" for the insurance industry

Hurricane Matthew made landfall on US soil just yesterday – IBA gets an exclusive interview with a major insurance exec who explains how he sees the potential fallout from the storm

Insurance News

By Heather Turner

As Southeast Florida recovers from Hurricane Matthew, the northeast portion of the state braces for the storm. It’s been nearly two decades since the Jacksonville areas has been issued a hurricane warning.
As the eastern seaboard waits for Matthew’s arrival, the insurance industry is waiting by also. According to Gary Marchitello, head of property broking for Willis Towers Watson, the now Category 3 hurricane “has a potential to be a market changing event for the commercial insurance industry.”
Much of the east coast has already suffered from flooding, power outages and damaging winds as coastal areas in Georgia and the Carolinas make final preparations and evacuations.
“When we are talking to our clients, one of the things that we are trying to ensure is that we sent out a packet of information so they can prepare themselves. I think a lot of people forgot how bad [a hurricane] can be. We try to make reminders by calling our clients to remind them to prepare for the worst,” said Brian Carlson, P&C practice leader for southeast Florida with USI Insurance Services.
Potential commercial insured losses are predicted to be in the billions but the market may be in a position to sustain the loss, says Carlson, without the consequence of premiums skyrocketing in its aftermath.  
However, Carlson did mention that if the market does suffer the loss estimated, insurance policyholders could expect deductibles to rise with many of the coverage enhancements that have been added over the years to now be excluded from policies. “We are now seeing things in our policies such as 2% wind deductibles. Five years ago, you had a 5% wind deductible and that was it. No one was really going below that. If we do have significant damage, we are probably looking at those 2% wind deductibles going away.”
Carlson adds that Hurricane Matthew could likely affect the coverage people place on properties versus what banks are now requiring. “For example, if you have $100 million worth of property, you might just buy $25 million in wind coverage and not $100 million,” commented Carlson. “I think the challenge will be that banks became used to people covering their properties to full-limits. But if we get a significant $30 billion loss, we may be in a position again where the insurance industry and banks will need to have discussions about people not covering all the properties to the full required wind limits.”
Hurricane Matthew is expected to hit northeast Florida and Georgia this evening and South Carolina Saturday. Meteorologists reported that its winds are currently at 120 mph.

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Hurricane Matthew threatens significant losses as it barrels toward US


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