By Scott McGinness
Thanks to Hurricanes Harvey, Irma, and Maria, timeshare resorts and businesses in general should prepare now for increased property-insurance premiums, and perhaps diminished availability of coverage in 2018. This is true particularly for resorts in coastal areas.
Getting an early start on the insurance renewal, perhaps 120 days in advance of the expiration date, gives your agent time to explore all available options in containing premiums and providing adequate coverage. If your resort’s coverage expires in the first quarter of the year, you’re already almost too late to do this.
Why the rush? Hurricane Harvey may be the costliest natural disaster in U.S. history, with damage estimates over $190 billion. It will have an economic impact not only on Texas, but the entire U.S. Claims from Irma and Maria will cost the insurance industry additional billions of dollars.
Premiums on the increase
For the timeshare industry, we can expect to see an increase in property-insurance premiums. The insurance market has been very competitive for the last few years, but these events are likely to trigger a widespread rate increase. Even those insurers not directly impacted by Harvey, Irma, and/or Maria will be forced to adjust rates based on the higher cost of reinsurance, upon which most carriers rely to share risk.
This event also will show the inadequacies of the National Flood Insurance Program (NFIP), including the lack of business-interruption coverage, which replaces lost revenue during a sustained interruption of operations. Many businesses, including timeshare resorts, are unable to recover without properly structured BI insurance.
The other major inadequacy of the NFIP is that it was $24 billion in debt prior to Harvey, and viewed by many to be unsustainable. Harvey may put it over the edge. The future availability of the NFIP and its ability to respond adequately to Harvey may be in doubt.
Private flood insurance
Because of the existence of the NFIP, traditional insurance carriers have played a secondary role in providing flood insurance. Those carriers willing to offer coverage do so with high deductibles, or in excess of NFIP limits.
With the future of the NFIP in doubt, they’ll need to step in to satisfy the demand for flood insurance. That will come with increased premiums, however, since the private insurance market won’t subsidize premiums as the federal government has been doing with the NFIP.
By Scott McGinness, CIC, CRM, CSRM, vice president, property & casualty, Gregory & Appel Insurance, www.gregoryappel.com.