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After the storms: homeowners deductibles and reinsurance raise questions in Florida.

Article Excerpt
Key Points

* Insurers have attempted to determine what damage was caused by each hurricane and how to apply deductibles.

* For some reinsurers, having a large amount of claims assigned to one hurricane could work out well.

* The four hurricanes raised issues concerning reinsurance reinstatements.

After four hurricanes swept through the U.S. Southeast in quick succession in 2004's third quarter, insurers have had to scramble to assess damages and sort out what damage was caused by which storm. The task is enormous, especially in Florida, where all four storms hit--three of them in roughly the same areas.

As claims and damage estimates slowly come into focus, problems tied to Florida's unique property insurance market have become evident. One of the thorniest may be the question of how to handle deductibles, which for Florida homeowners may be up to 2% of the insured value of their property per occurrence.

How insurers apply those deductibles to multiple claims from several storms is uncertain, so much so that state officials are already calling for legislative action to change the rules.

"It's a real mess," said Tim Gardner, managing director with reinsurance broker Guy Carpenter & Co., referring to unique claims problems caused by hurricanes Charley, Frances, Ivan and Jeanne. "There are a whole host of issues involved here, some of which are political."

Gardner cited state Chief Financial Officer Tom Gallagher's much-quoted comment that per-occurrence deductibles on homeowners policies are "unfair," as claims problems became more obvious. "It's an interesting position to take, when you...

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