Homeowner’s insurance rates in Florida already are third highest in the country, behind Texas and Louisiana. The primary factor for Florida rates is our huge hurricane risk. Not only does Florida have more exposed coastline than almost any other state, the concentration of population, high rises and other construction in southeast Florida is unmatched.

Fifty-five (55) percent of every dollar paid by insurance companies for hurricane damage in the United States has been paid in Florida. Hurricane Andrew in 1992 remains the most expensive natural catastrophe insurance event in U.S. history, costing $21 billion in losses in today’s dollars. Only one category four or five hurricane has struck southeast Florida in the last 25 years, Hurricane Andrew. Thirteen category four or five hurricane struck southeast Florida during the previous 25 years.

After Hurricane Andrew, homeowners insurance rates increased 100 percent statewide and 200 percent in southeast Florida, where insurers faced the largest potential losses from a major storm. These increases were necessary, because Andrew demonstrated hurricane insurance in Florida was significantly under-priced. Rates were fairly steady during the late 1990’s, but began to rise again recently, although nowhere near the magnitude during the post-Andrew era.

OIR reports that the top 10 private market insurers raised rates an average 2.7 percent in 2003, 22 percent in 2002, 3 percent in 2001, and 7 percent in 2000. Recent increases have been driven by higher claims payments for mold and water damage and sinkholes, plus the need for some carriers to set aside additional funds for the inevitable “Son of Andrew.”

What is the industry doing to control costs in homeowners insurance? Major insurers are working with Chief Financial Officer Tom Gallagher and Kevin McCarty, Office of Insurance Regulation director, to increase the capacity of the Florida Hurricane Catastrophe Fund. The Cat Fund was established immediately after Hurricane Andrew to replace private market catastrophe reinsurance used up by the unprecedented Andrew disaster.