Why have rates for coastal property insurance increased so dramatically?
The increases that coastal property owners have experienced are attributable to the cost of reinsurance and the cost of reinsurance is attributable, in part, by rating agency actions. Rating agencies rate the financial strength of insurers. For example, an insurance company with an A++ rating may be classified as “superior” and an insurance company with an A- rating may be classified as “very good.” Ratings are important to both consumers and insurers. Consumers benefit from these ratings because they are assured that their claims will be paid. Additionally, insurers with better ratings receive better credit terms than insurers with lower ratings. Based on the current weather predictions and catastrophe model estimates, rating agencies have increased the capital requirements for insurers writing coastal property insurance. Prior to 2005, insurers generally were required by rating agencies to have sufficient capital to pay claims associated with one 100-year storm (a storm that has a 1%
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- Why have rates for coastal property insurance increased so dramatically?
