by Bradley Parsons
Staff Writer
Hurricane-fueled increases to insurance costs could be whipping up a storm in the City’s finances, the City’s risk management chief warned Monday.
Charles Spencer, chief of the City’s Risk Management Division, told the City Council’s Finance Committee to prepare to spend a lot more to insure the City’s property. Premiums and deductibles are rising, which means the City will spend more to receive less coverage. That’s if the City is fortunate enough to find a provider, he said.
“The largest providers of wind coverage are withdrawing from the Florida market,” said Spencer. “If you think about supply and demand, that means the supply side is shrinking and we’re all going to be competing for less coverage.”
Florida is part of a trend running throughout the Gulf states: Insurance carriers are fleeing those markets after consecutive devastating hurricane seasons.
Exact numbers for what the City spends to insure its property weren’t available. But the City spends above seven figures each year. Spencer expects the City’s premium costs to double over the next few years. He called that estimate “conservative.”
“Some cities’ premiums are up 400 percent,” he said.
And those estimates don’t account for the possibility of new storms hitting Florida. Forecasts predict this year’s hurricane season will produce six major storms.
Spencer appeared before the committee to ask for $500,000 to pay for rising premiums. The committee unanimously approved the bill, which still needs approval from the full Council. Council member Lad Daniels said that figure likely represents “the tip of the iceberg.”
Daniels, president of Daniels & Associates and president of the First Coast Manufacturer’s Association, said he’s seeing the same situation in the private market.
“From what I’m seeing and hearing, just about every commercial property insurance contract has been canceled,” he said. “If you’re able to get insurance in Florida, the premiums are up at least 300 percent.”
And that money is paying for less coverage. Daniels said deductibles in the private market are doubling.
“It’s a situation where, if you own property that incurs severe damage from wind and floods, there’s no way to pay the deductible,” he said. “You simply send the keys back to the mortgage holder and let them sort it out.”
Daniels called the half-million dollar expenditure approved Monday, “the opening act for a horrible experience coming the next budget cycle.” Spencer said Daniels’ assessment was “very accurate.”
The dwindling supply of wind and flood insurance providers in Florida became a difficult issue for the Florida Legislature during the 2006 session. The Florida Bar backed legislation that would have required Florida carriers to offer wind and flood coverage.
The legislation was beaten back by a last-minute vote. Tom Edwards, a partner with Peek, Cobb & Edwards and a top lobbyist for the Association of Florida Trial Lawyers, said the group will continue to push for the legislation next year.
The aim, he said, is to prevent insurance carriers from “cherry picking” the areas they want to insure, he said.
Finance Chairman Daniel Davis asked the mayor’s office to begin looking at local fixes. Those could include selling City-owned property to the private sector. That would raise money through the sale and by putting the property on the tax rolls, he said.