Florida consumers ‘flabbergasted’ as property insurers push for double-digit rate hikes

By Suzanne Barlyn

(Reuters) – Florida property insurers are jacking up rates by double-digit percentages, blaming the hikes on lingering damage from past hurricanes, a wave of litigation, and a law that encourages lawyers to sue by allowing courts to award them big fees.

The rate increases in Florida, the third-largest property insurance market among U.S. states, are the highest in memory, according to some insurance agents and residents. One danger, they say, is that the new rates could make owning a home in Florida unaffordable.

“I was flabbergasted,” said Karlos Horn, a 35-year-old law student who owns a four-bedroom, single-family home in Hendry County, Florida. He said his premium doubled to $200 per month last August.

That is equivalent to half of his $400 mortgage payment and the largest increase in his five years as an owner.

Florida’s property insurance market, which collected $56.6 billion in premiums during 2019, is unique and covers complex risks including devastating hurricanes and the impact of climate change. Many insurers left the state after suffering big losses from hurricanes Katrina and Wilma in 2005, leaving about 60 small and mid-sized firms underwriting property policies there today.

Although there were no major weather events last year, some insurers are still grappling with claims from Hurricane Irma in 2017, said Logan McFaddin, an American Property Casualty Insurance Association executive who specializes in Florida.

They are also facing what McFaddin described as “out of control” litigation in Florida, partly because of a law that can require insurers to pay attorneys “excessive fees” in those cases. The practice has spurred a cottage industry of contractors and lawyers who sue insurers to replace a whole roof when only a few tiles are damaged, insurers say.

Other less dramatic problems, such as leaky pipes, happen at an “abnormally high” frequency in Florida, often causing severe damage, including mold, consistently gnawing at profits, said Charles Williamson, chief executive officer of Vault, a Florida-based insurance exchange for wealthy individuals.

Insurers are also passing along to consumers the cost of hefty rate hikes for their own coverage, known as reinsurance, which kicks in after insurers pay a set amount of claims.

INSURER OF LAST RESORT

Florida’s domestic property insurers reported a more than $1 billion underwriting loss for the first three quarters of 2020 and almost $500 million in negative net income, according to the Florida Office of Insurance Regulation.

“Insurance carriers understand that their role in our marketplace is to pay claims,” Florida Insurance Commissioner David Altmaier told Reuters. “The challenge is when those claims are so much more expensive than they expect, it creates uncertainty, it creates turmoil – and that has to be addressed.”

Florida insurers requested 105 rate increases during the first ten months of 2020, Altmaier said. More than half of the increases that regulators approved were greater than 10%.

Last month, Altmaier testified before Florida lawmakers, including his views on roofing litigation. “We need to really spend some time on this … coming up with ways that we might be able to mitigate this kind of activity,” he said.

Lee Gorodetsky, an insurance agent in Fort Lauderdale, Florida, said he cannot recall such steep rate hikes during his 34-year career. “The last two years have been the worst we’ve seen,” he said.

As prices rise, more consumers are turning to Citizens Property Insurance Corp, Florida’s insurer of last resort, which takes on high-risk customers who cannot obtain other insurance or must pay extremely high rates.

Citizens issued 545,000 policies as of Feb. 5, a 23% increase from a year ago, and it expects the number to grow to about 700,000 by year-end, a spokesman said. The growth signals an unhealthy broader market by showing that typical coverage is not as widely available, industry experts said.

Insurers are hoping Florida’s state government will approve proposed legislation that would curb the elevated litigation costs they have seen in recent years. The bill, if passed, would add to other reforms enacted in 2019.

Measures would include limiting the fees insurers must pay lawyers in claims disputes, shortening time frames for filing claims and capping payouts for roof replacements.

However, the bill might also harm homeowners’ ability to pursue legitimate claims, lawyers said. That would unfairly favor insurers, one lawyer said.

“It’s a great business model that insurers can collect premiums and not get sued when they don’t pay somebody right away everything that’s owed,” said Tampa lawyer Chip Merlin, who represents policyholders. “It doesn’t take a rocket scientist to figure out that that’s good for the insurance industry.”

(Reporting by Suzanne Barlyn in Washington Crossing, Pa.; Editing by Lauren Tara LaCapra and Matthew Lewis)

‘There’s no food’: U.S.-bound migrant caravan hunkers down after Guatemala crackdown

By Luis Echeverria

VADO HONDO, Guatemala (Reuters) – Hundreds of mostly Honduran migrants huddled overnight on a highway in eastern Guatemala after domestic security forces used sticks and tear gas to halt the passage of a U.S.-bound caravan just days before U.S. President-elect Joe Biden takes office.

As many as 8,000 migrants, including families with young children, have entered Guatemala since Friday, authorities say, fleeing poverty and lawlessness in a region rocked by the coronavirus pandemic and back-to-back hurricanes in November.

“There’s no food or water, and there are thousands of children, pregnant women, babies, and they don’t want to let us pass,” said a Honduran stuck at the blockade who gave his name only as Pedro.

Guatemalan authorities said late on Sunday they have sent 1,568 migrants back home since Friday, the vast majority to Honduras. Nearly 100 were returned to El Salvador.

A Reuters witness said about 2,000 migrants were still camped out on the highway near the village of Vado Hondo, about 55 km (34 miles) from the borders of Honduras and El Salvador, after clashing with Guatemalan security forces on Sunday.

“We’re starving,” said one Honduran mother, stuck behind the cordon with her 15-year-old son, her daughter, 9, and her 4-year-old niece.

“All we have is water and a few cookies,” said the woman, who declined to give her name, but added that she and other travelers had formed a prayer circle as they camped out.

Other migrants evaded the gridlock by fleeing into the hills to continue onward to the border of Mexico, where the government has deployed police and National Guard troopers.

“We ran into the mountains because I’m traveling with my one-year-old,” said Diany Deras, another Honduran.

Mexico’s border with Guatemala was quiet.

“All is calm here,” said a National Guardsman in charge of a border crossing directly opposite Tecun Uman, Guatemala, where caravan leaders hope to cross into Mexico. He sought anonymity as he was not authorized to speak to media.

“I hope Guatemala contains them,” he added.

(Reporting by Luis Echeverria in Vado Hondo, Sofia Menchu in Guatemala City and Laura Gottesdiener in Tapachula; Writing by Laura Gottesdiener; Editing by Clarence Fernandez)

Guatemalan families mourn death of children as hunger spreads

By Sofia Menchu

LA PALMILLA, Guatemala (Reuters) – Two-year-old Yesmin Anayeli Perez died this week of illnesses linked to malnutrition, the third small child to die from similar causes in an impoverished mountain village in eastern Guatemala within weeks, residents and health officials said.

Residents of the indigenous Mayan village, La Palmilla, and other parts of a region known as the Dry Corridor sunk deeper into poverty last year when economic damage wrought by droughts and two devastating hurricanes was compounded by the coronavirus lockdown.

The second of three children, Yesmin had a history of acute malnutrition, which causes rapid weight-loss and wasting, and for which she was hospitalized several times over the past year.

In the months before her death, Yesmin’s legs and arms were stick-like and her belly swollen by water retention, even though she had gained a little weight. Reuters visited her family in their home in October, where Yesmin, dressed in a purple t-shirt, was being fed a high protein mash by her mother.

In the early hours of Monday, Yesmin died, her eyes bulging and her frail body distorted by a persistent cough and long struggle with lung illness linked to her inadequate nutrition, her father Ignoja Perez told Reuters.

Just over half the normal weight for her age, she was suffering malnutrition and pneumonia made worse by the cold and damp weather that followed the hurricanes, local health official Santiago Esquivel said.

Sitting in front of her small coffin, in a home with a dirt floor and tin roof, her father said the family had been hopeful she would make a recovery.

“I bought her some vitamins on Sunday, to see if she would put on weight, we were going to start the treatment on Monday, with a spoonful,” Perez recalled. “But she got worse.”

Yesmin was buried on a hilltop along with some of her clothes, a bottle of water and a small, orange plastic drinking cup in a traditional ceremony on Tuesday.

The family had celebrated her second birthday with a bowl of chicken soup just a few weeks earlier.

The Guatemalan government denies that Yesmin was suffering malnutrition at the time of her death, or at any time during 2020. However, medical records reviewed by Reuters showed she was diagnosed as suffering from acute malnutrition at least until March.

Guatemala’s Food and Nutritional Security Secretariat said in a statement that Yesmin and her family had received support from authorities, in recognition that she had suffered malnutrition and lung problems at birth.

Asked why she was not classified as malnourished in 2020, the agency referred Reuters to the Health Ministry. The ministry did not respond to requests for comment.

TRAPPED BY POVERTY

Government data show acute malnutrition among the under-fives rose by 80% in Guatemala in 2020 compared to 2019.

The government said the jump was partly due to improved methodology. However, data gathered by Oxfam last year also showed large increases in families facing food shortages, including a four-fold jump in severe shortages in the province around La Palmilla.

At least 46 children under five died of hunger-related causes in 2020 in Guatemala, according to the government data, well below previous years. Ivan Aguilar, a humanitarian program coordinator based in Guatemala at Oxfam, said the drop appeared to be due to officials attributing deaths related to malnutrition to other causes, including the case of Yesmin.

Yesmin was the third young child to die in the village of around 3,000 people since October, local health official Esquivel said. Yesmin was buried a few feet away from another girl who died on Dec. 26.

The deaths are unusual even in a region that grew tragically accustomed to such deaths after drought destroyed crops every year for half of the past decade, Esquivel added.

“Sometimes a child would die, but not like this, one after the other,” he said.

The crisis is driving a new round of migration north.  But in La Palmilla and other villages in the eastern highlands, people said they lack the money to up and leave.

Without work for months during a lockdown from February, Perez borrowed money and sold his coffee crop, spending the little he raised to pay for Yesmin’s treatment in nearby city Zacapa.

The two hurricanes in November wiped out his field of beans, leaving only corn in the ground, and the walls of his mud-block house cracked with the rain, letting the winter chill inside.

“I wish I could go to the United States, but without money, we have to stay,” he said, looking down at his daughter’s still body.

(Reporting by Sofia Menchu; Writing by Stefanine Eschenbacher; Editing by Frank Jack Daniel and Rosalba O’Brien)

Honduras hurricanes push thousands into homelessness

By Jose Cabezas

SAN PEDRO SULA, Honduras (Reuters) – Willian Castro and his family huddled on the roof of a banana packing plant for three days as Hurricane Eta raged last month, seeking to escape the torrential rains and floods that swept through his home and thousands of others.

His city of San Pedro Sula in northern Honduras was one of the areas worst hit by Eta and Hurricane Iota, which struck just two weeks later, deepening the economic hardship caused by the coronavirus pandemic in Central America.

Castro, 34, worked as a barber from his home, which was destroyed in the storms. He is now considering following thousands of Hondurans before him who saw emigration north as a way out of poverty.

“We will have to start over,” he said. “We can’t do it alone. If not, I’ll have to think about what many have done in the past, go to the United States.”

For now, Castro is living in a friend’s house near San Pedro Sula. Private organizations have given his family food, and neighbors who receive remittances from relatives in the United States have also helped.

“The government has not given us anything,” Castro said.

Julissa Mercado, a spokeswoman for government disaster agency COPECO, said the area around San Pedro Sula received food aid, but that it was inevitable that some people would say they had not received assistance.

Nationwide, some 4.5 million people – half the Honduran population – have been impacted by the hurricanes and their aftermath, including landslides and rain that submerged entire communities, the government said. More than 85,200 homes were damaged and 6,100 destroyed.

In Castro’s old neighborhood, the accumulated rainwater is a meter high in some areas, and downed power poles and trees, furniture and appliances still clutter the streets.

Some 95,000 people in San Pedro Sula have taken refuge in shelters. Thousands of others sleep each night in flimsy sheds made of wood and plastic sheets, on sidewalks or under bridges.

President Juan Orlando Hernandez has called for help from other nations. “It’s the worst disaster that we have experienced in the history of the Republic of Honduras,” he said on Thursday at an event recognizing first responders.

Even before the twin storms, which also killed 100 people, Honduras was expecting an economic contraction of 10.5% this year due to the pandemic.

“After losing their homes, assets and even their jobs, people who were already poor are now even worse off,” said Nelson Garcia, director of the Mennonite Social Action Commission (CASM), a human rights organization.

(Reporting by Jose Cabezas and Gustavo Palencia; Writing by Adriana Barrera, Editing by Daina Beth Solomon and John Stonestreet)

House Democrats file bill to fund U.S. government but leave out new farm money

By Richard Cowan and Susan Cornwell

WASHINGTON (Reuters) – The

By Richard Cowan and Susan Cornwell

WASHINGTON (Reuters) – The U.S. Congress this week will consider legislation funding the federal government through mid-December, with lawmakers hoping to avoid the spectacle of a government shutdown amid a pandemic and just weeks before the Nov. 3 elections.

House Democrats announced Monday they had filed the legislation, which leaves out new money that President Donald Trump wanted for farmers. A Democratic aide said the bill could be on the House floor as soon as Tuesday. The Senate could then act later this week.

The new federal fiscal year starts on Oct. 1.

The bill is designed to give lawmakers more time to work out federal spending for the period through September 2021, including budgets for military operations, healthcare, national parks, space programs, and airport and border security.

The spending proposal “will avert a catastrophic shutdown in the middle of the ongoing pandemic, wildfires and hurricanes, and keep government open until December 11, when we plan to have bipartisan legislation to fund the government for this fiscal year,” House Speaker Nancy Pelosi said in a statement.

But the measure’s December end date will require Congress to return to the government funding question again during its post-election lame-duck session, either during or after what could be a bruising fight to confirm Trump’s third Supreme Court nominee after the death of Supreme Court Justice Ruth Bader Ginsburg.

And the legislation does not include $21.1 billion the White House sought to replenish the Commodity Credit Corporation, a program to stabilize farm incomes, because Democrats considered this a “blank check” for “political favors,” said a House Democratic aide who asked not to be named. Trump promised more farm aid during a rally in Wisconsin last week.

Republicans were not happy. “House Democrats’ rough draft of a government funding bill shamefully leaves out key relief and support that American farmers need. This is no time to add insult to injury and defund help for farmers and rural America,” Senate Majority Leader Mitch McConnell wrote on Twitter. Republicans could seek to amend the document to add in the provision.

The bill proposes spending $14 billion to shore up a trust fund that pays for airport improvements and air traffic control

operations. It also proposes extending surface transportation funding for another year, directing $13.6 billion to maintain current spending levels on highways and mass transit.

Pelosi said the bill would also save America’s older citizens from an increase in Medicare health insurance premiums of up to $50 per month.

Congressional Democrats have had a stormy relationship with the White House over federal funding since Trump took office early in 2017. He has sought deep cuts in domestic spending while ramping up military funds.

(Reporting by Richard Cowan and Susan Cornwell; additional reporting by David Shepardson and Doina Chiacu; Editing by Scott Malone and Steve Orlofsky)

this week will consider legislation funding the federal government through mid-December, with lawmakers hoping to avoid the spectacle of a government shutdown amid a pandemic and just weeks before the Nov. 3 elections.

House Democrats announced Monday they had filed the legislation, which leaves out new money that President Donald Trump wanted for farmers. A Democratic aide said the bill could be on the House floor as soon as Tuesday. The Senate could then act later this week.

The new federal fiscal year starts on Oct. 1.

The bill is designed to give lawmakers more time to work out federal spending for the period through September 2021, including budgets for military operations, healthcare, national parks, space programs, and airport and border security.

The spending proposal “will avert a catastrophic shutdown in the middle of the ongoing pandemic, wildfires and hurricanes, and keep government open until December 11, when we plan to have bipartisan legislation to fund the government for this fiscal year,” House Speaker Nancy Pelosi said in a statement.

But the measure’s December end date will require Congress to return to the government funding question again during its post-election lame-duck session, either during or after what could be a bruising fight to confirm Trump’s third Supreme Court nominee after the death of Supreme Court Justice Ruth Bader Ginsburg.

And the legislation does not include $21.1 billion the White House sought to replenish the Commodity Credit Corporation, a program to stabilize farm incomes, because Democrats considered this a “blank check” for “political favors,” said a House Democratic aide who asked not to be named. Trump promised more farm aid during a rally in Wisconsin last week.

Republicans were not happy. “House Democrats’ rough draft of a government funding bill shamefully leaves out key relief and support that American farmers need. This is no time to add insult to injury and defund help for farmers and rural America,” Senate Majority Leader Mitch McConnell wrote on Twitter. Republicans could seek to amend the document to add in the provision.

The bill proposes spending $14 billion to shore up a trust fund that pays for airport improvements and air traffic control

operations. It also proposes extending surface transportation funding for another year, directing $13.6 billion to maintain current spending levels on highways and mass transit.

Pelosi said the bill would also save America’s older citizens from an increase in Medicare health insurance premiums of up to $50 per month.

Congressional Democrats have had a stormy relationship with the White House over federal funding since Trump took office early in 2017. He has sought deep cuts in domestic spending while ramping up military funds.

(Reporting by Richard Cowan and Susan Cornwell; additional reporting by David Shepardson and Doina Chiacu; Editing by Scott Malone and Steve Orlofsky)

White House to announce $11.6 billion aid for Puerto Rico: Fox News

WASHINGTON (Reuters) – The White House plans to announce an $11.6 billion aid package for Puerto Rico, focused on the territory’s energy and education systems, to help the island recover from the devastation brought by 2017’s Hurricane Maria, Fox News reported on Friday, citing unnamed sources.

Puerto Rico was already struggling financially before the deadly hurricane struck three years ago, and filed a form of municipal bankruptcy for the commonwealth in 2017 to restructure about $120 billion of debt and obligations.

Since then, the U.S. commonwealth has been hit by more hurricanes, earthquakes, the coronavirus pandemic and political upheaval, and has been the target of increased federal scrutiny into its use of U.S. aid. A large portion of its financial distress was linked to the territory’s power utility.

(Reporting by Lisa Lambert; editing by Susan Heavey and Jonathan Oatis)

Between two storms: Caribbean braces for hurricanes in coronavirus era

By Sarah Marsh and Rodrigo Campos

HAVANA/NEW YORK (Reuters) – Ken Hutton is worried Great Abaco Island in the Bahamas where he lives is far from rebuilt after being devastated by Hurricane Dorian last year yet he is bracing for another hurricane season in the midst of the coronavirus pandemic.

The business consultant feels lucky to have survived Dorian, which tore the hurricane shutters off his house and sucked out the windows.

Yet there is still no running water or power in his area – he relies on a generator and a well – and many of the organizations that had been helping to rebuild suspended work because of the pandemic.

“We are still in no position to be ready for another hurricane,” he told Reuters Tuesday. Already, the Caribbean has been hit by two tropical storms before the official start of the hurricane season on June 1, one of which started right over the Bahamas, Hutton added.

“There are lots of people walking around here now with post-traumatic stress disorder,” he said.

Hurricane Dorian caused $3.4 billion in damages – more than a quarter of the annual output of the Bahamas or the equivalent of the United States losing the combined outputs of California, Texas and Florida, according to the Inter-American Development Bank.

Across the Caribbean, island nations are now facing the double whammy of a hurricane season forecast to be more active than usual combined with a pandemic that has already drained public coffers and leveled tourism, one of its top earners.

The National Oceanic and Atmospheric Administration last week forecast 13-19 named storms this year, following 18 named storms last year and 15 in 2018, both above the average of 12.

But the Caribbean has used up much of the fiscal buffers it would usually have readied to respond to hurricane season, Caribbean Development Bank President Warren Smith said.

Countries have tapped typical sources of external emergency financing, like the International Monetary Fund (IMF), to respond to the coronavirus crisis, further limiting their funding options.

Meanwhile, new health protocols for hurricane season prep comes at an added cost. The Caribbean Disaster Emergency Management Agency (CDEMA) has revised guidelines to prevent the virus’ spread, including social distancing, personal protective equipment and hand cleaning facilities in shelters, said CDEMA head Elizabeth Riley.

“We can’t put as many people into a shelter (with social distancing), which means we must have many more shelters available,” St Lucia Prime Minister Allen Chastanet told Reuters.

ECONOMIC STORM

Caribbean nations have had to absorb the high costs of managing virus outbreaks even as they have lost revenue from the stop in tourism caused by border closures and lockdowns, while also being forced to provide a welfare safety net to more people.

The economic outlook does not look set to improve any time soon, with the Caribbean facing a regional contraction of 6.2 % according to the IMF.

“Small island states rely heavily on tourism and remittances. Both are now at a standstill,” United Nations head Antonio Guterres said on Thursday. “Households that had a secure income are at imminent risk of poverty and hunger.”

He added that alleviating “crushing” debt “must be extended to all developing and middle-income countries” that request forbearance as they lose access to their main financial markets.

But it is not all doom and gloom. In Cuba, a meme went viral on social media in recent weeks appearing to present a duel for television airtime between the country’s chief epidemiologist and its most renowned weatherman as they cover the two crises.

The weatherman, Jose Rubiera, told Reuters much of what happens will depend on each storm’s route.

“One single hurricane can be devastating whereas you can have many that don’t hit,” he said. “It’s all very relative, but the one rule of thumb is to always be well prepared.”

(Reporting by Sarah Marsh in Havana and Rodrigo Campos in New York; Additional Reporting by Sarah Peter in Castries, St Lucia, Nelson Acosta in Havana and Karin Strohecker in London; Editing by Daniel Flynn and Aurora Ellis)

Rising U.S. losses from powerful hurricanes flag need for better protection

A police car is submerged in New Orleans East August 31, 2005 after Hurricane Katrina hit the area. Authorities struggled on Wednesday to evacuate thousands of people from hurricane-battered New Orleans as food and water grew scarce and looters raided stores, [while U.S. President George W. Bush said it would take years to recover from the devastation.]

Rising U.S. losses from powerful hurricanes flag need for better protection
By Anna Scholz-Carlson

LONDON (Thomson Reuters Foundation) – Only a few U.S. states are taking significant steps to reduce hurricane risks, as a study this week showed the most damaging storms are now three times as frequent as a century ago and have become the costliest type of disaster, scientists said.

Using a new method, a team at the University of Copenhagen’s Niels Bohr Institute found the frequency of the worst hurricanes had increased 330% over the last century in the United States.

But many government authorities in the country remain unprepared to deal with the surging risk, said Natalie Peyronnin Snider, senior director of coastal resilience for the Environmental Defense Fund (EDF), a U.S.-based advocacy group.

Getting ready would require policy and ground-level changes, including efforts to boost coastal protection, she said.

In a study published in the journal Proceedings of the National Academy of Sciences of the United States of America (PNAS), University of Copenhagen scientists looked at parts of the United States hit by hurricanes in the last century, analysing changes in wealth and population densities to compare losses over time.

Previous research suggested the growing costs of damage from storms were largely due to costlier infrastructure and homes in their path, rather than a rise in the strength or frequency of hurricanes themselves, said Aslak Grinsted, a study lead author.

But the new work showed the growing number of powerful hurricanes was the key factor in increasing losses, he said.

Having clearer information should help communities plan ahead to curb losses, he told the Thomson Reuters Foundation.

Louisiana is one of the few states that has a comprehensive plan to deal with a growing hurricane threat, said EDF’s Snider.

In 2012, it launched a $50-billion Coastal Master Plan to elevate homes with severe flooding risk, create more wetlands, restore marshes and create rock breakwaters to better protect communities from surging storms.

The effort aims to help the southern state better weather hurricanes over the next 50 years, according to the Louisiana Coastal Protection and Restoration Authority website.

The plan was in part a response to severe losses from Hurricane Katrina in 2005, it noted.

Snider said using natural systems to curb hurricane risk – such as wetlands that can absorb excess water and prevent flooding or oyster-covered reefs to absorb wave energy – are cost-effective ways to curb damage from powerful hurricanes.

But Louisiana is not the only state looking to lower its hurricane risks.

In New York, a community-led project aims to restore 1 billion live oysters to New York Harbor by 2035, in part to tackle storm threats, according to its website.

Still, federal and state governments need to do more to protect their people, assets and ecosystems, Snider said.

“It’s really important that we start to be proactive and aggressive … in building resilience in our systems, which not only pays off financially but also for the health of communities,” she said.

Each dollar spent to cut disaster risk can save six dollars otherwise spent recovering after a disaster, she added.

(Reporting by Anna Scholz-Carlson; editing by Laurie Goering and Megan Rowling. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, climate change, resilience, women’s rights, trafficking and property rights. Visit http://news.trust.org/climate)

Catastrophes set to drive 2020 reinsurance rates higher

FILE PHOTO: An "Emergency shelter" sign points to the Pedro Menendez High School ahead of the arrival of Hurricane Dorian in St. Augustine, Florida, U.S., September 2, 2019. REUTERS/Marco Bello - RC1823A64B90/File Photo

By Carolyn Cohn and Lena Masri

LONDON (Reuters) – Big insurance losses from hurricanes, wildfires and other natural disasters over the past two years are set to push reinsurance renewal rates higher in January, ratings agencies said.

After falling for several years due to competition and fewer natural disasters, renewal rates have started to climb in the past couple of years and for 2020 are set to rise on average by as much as 5%.

However, as Hurricane Dorian ravages the Bahamas and bears down on the United States, Fitch, Moody’s and S&P Global said some rates could jump by much more than that.

S&P said rates would likely rise by around 5%, Moody’s expected rises of 0-5%, while Fitch predicted 1-2%, in briefings ahead of the reinsurance industry’s annual conference in Monte Carlo which begins on Saturday.

Reinsurers such as Swiss Re, Munich Re, and the Lloyd’s of London market help insurers share the risks of disasters in return for part of the premium.

“It’s not a hard market but it’s a hardening market, there’s more positive momentum,” Ali Karakuyu, lead analyst at S&P Global, told a media briefing.

Fellow analyst David Masters said the industry was likely to see “mid-single-digit price increases” as a result.

Insurers are increasingly concerned about the impact of bad weather linked to climate change, with an increase in wildfires in California among the most costly in recent years, something S&P said could see rates there jump 30-70%.

“This market remains in disarray, which will fuel further rate increases,” a slide from the S&P presentation said.

Analysts at UBS estimated that the reinsurance industry is in an excess capital position of around $30 billion, but that an estimated $70 billion of natural catastrophe losses in 2019 could erode this excess capital.

Moody’s analysts said lines of business that have been performing badly over the last few years, for example due to losses related to hurricanes in the United States, would see price rises in the mid-teens.

Fitch Senior Director Graham Coutts said he expected average rates to rise 1-2%, similar to the increases seen in January 2019, although further rises could be seen depending on the scale of losses from Dorian and other hurricanes.

(Editing by Simon Jessop/Alexander Smith/Susan Fenton)

Forest fire insurance costs soar

FILE PHOTO: A group of U.S. Forest Service firefighters monitor a back fire while battling to save homes at the Camp Fire in Paradise, California, U.S. November 8, 2018. REUTERS/Stephen Lam/File Photo

MUNICH (Reuters) – Forest fires are becoming increasingly likely because of climate change and cost insurers more than ever, with the deadly fire that ravaged northern California the single most expensive natural disaster in 2018, Munich Re said on Tuesday.

The California wildfire that devastated the small town of Paradise in November caused losses of $16.5 billion, of which $12.5 billion were insured, according to the reinsurer’s annual catastrophe report.

Worldwide natural disasters caused $160 billion in economic damage in 2018. That was down from $350 billion the previous year, but a number of devastating hurricanes had contributed to the high losses in 2017.

Insurers and reinsurers paid out $80 billion for natural disaster claims last year, down from $140 billion a year earlier but almost double the 30-year average of $41 billion, the reinsurer said.

Munich Re board member Torsten Jeworrek said that 2018 was marked by several severe natural disasters with high insured losses.

“These include the unusual coincidence of severe cyclones in the U.S. and Japan, and devastating forest fires in California,” he said, adding that climate change appears to be making such large fires more common.

Insurers spent $18 billion on two huge fires in the United States in 2018 – equivalent to one in every four dollars they paid out as a result of natural disasters.

Ernst Rauch, the reinsurer’s chief climatologist, told Reuters that forest fires were entering a whole new dimension, costing tens of billions of dollars.

“Higher and higher temperatures are leading to ever greater droughts, and high humidity in the winter means that shrubbery grows quickly, creating an easily flammable material in dry summers,” he said.

Rauch said it was questionable whether areas at high risk could continue to be populated without taking additional measures, such as building houses further from forests and with better safety standards.

In Europe, an unusually hot summer caused a drought that wrought considerable damage on the agricultural sector and was the continent’s most expensive natural disaster at $3.9 billion. However, only a fraction of those losses were insured.

Reinsurers act as a financial backstop to insurance companies, paying a chunk of the big claims for storms or earthquakes in exchange for part of the policy premiums.

Hurricanes and typhoons caused $56 billion of damage last year. Hurricane Michael, which wrought devastation in Florida, was the most expensive for insurers, causing losses of $10 billion.

The review gave no claims figures for Munich Re itself. The reinsurer is due to report fourth-quarter results on Feb. 6.

(Reporting by Alexander Huebner; Writing by Caroline Copley; Editing by David Goodman)