Hurricanes - who should pay and who does pay?

Phil Bristow of nsure
Phil Bristow of nsure

Nsure's Phil Bristow writes a monthly feature for the Worthing Herald and other Sussex Newspapers titles about issues from the world of insurance. Here's his latest offering - on the subject of hurricanes

The 30th anniversary of the Great Storm of October 1987 seems to have coincided with a particularly-nasty hurricane season across the Atlantic.

Billed as a hurricane at the time, the anniversary will bring back memories of a very uncomfortable stormy night by our standards, but it almost pales into insignificance compared with what parts of the Caribbean and Gulf of Mexico have experienced with hurricane Irma and Maria.
I recall receiving a phone call from my neighbour saying our garage roof was flapping against the house roof. It was too dangerous to go out as tiles were flying everywhere and, seeing the chimney pot in the back garden, we moved to the front of the house in case the chimney came down on to the bedrooms.
The loss of life (18 dead) and devastation caused is well-documented, but the winds we experienced that night were ‘only’ the equivalent of a category-one hurricane, (sustained winds over 80mph), though gusts of up to 120mph were recorded in Shoreham.
Irma was category five with sustained winds peaking at 185mph, more than double those we experienced. No wonder islands like Anguilla were virtually wiped out.
We have problems in the UK with floods, and many commercial properties in high-risk flood areas unable to obtain insurance, so what about those in the Caribbean and Gulf of Mexico frequently affected by hurricanes?
On islands such as Anguilla, while commercial buildings and more expensive private residences are likely to have property insurance, it’s common that mortgage-free residential and small business properties have no insurance or are greatly under-insured.
The Anguillan government will receive $6.5m from the Caribbean Catastrophe Risk Insurance Facility, designed to provide rapid payments to finance initial disaster response. Britain has promised £25m to help rebuild – but otherwise they are reliant on overseas aid.
The US system is complicated as they separate wind damage from flooding, even if caused by the same hurricane, and flood cover is supposed to be mandatory in higher-risk areas where a property is used to secure a loan. They have a mix of state-backed and conventional insurers, but it can be expensive and many properties are uninsured.
In Florida, as Irma approached, there were major concerns it could break the local insurance market, but they got ‘lucky’, as Irma deviated by about 20 miles from the predicted course, missing the most densely-populated areas of the affluent Gulf Coast, although the total cost could still be $50bn.
That is much higher than the $27bn for the last major hurricane (Andrew) to hit the area 25 years ago, after which many larger insurers pulled out and the state-backed Florida Citizens’ Property Insurance Corp had to be set up.
Insurers were tested again with bad hurricane seasons in 2004-05, but even with 12 years of relative calm to rebuild reserves, it has been with the knowledge another ‘big one’ would come along.
Irma is likely to reignite the debate as to whether property owners or the state should pay for major catastrophes, but in the meantime many uninsured Americans, like many in the Caribbean, will be reliant on state aid.

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Longer-term readers will have previously heard how my mid-life crisis has manifested itself in the form of ‘ultra’ events, including a couple of attempts to swim the channel, writes Phil Bristow.
While I ponder a third attempt, the South Downs Way 100-mile run provided a distraction (for 28 hours 50 minutes).
The next challenge is to try and break four hours for a marathon in Abingdon in October, although it has been much harder to convert from jog/walk for the 100-miler to the faster sub four-hour pace needed than I thought. Hopefully I am nearly there, but we will see on the day.

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