Will Florida Insurers & Homeowners Weather the Storms? Will Hurricane Helene & Milton flood them with losses? Can homeowners rebuild? Should they? With back-to-back Category 4 (Helene) and Category 3 (Milton) hurricanes, the questions of recovery and rebuilding have begun. How much will it cost? Will insurers remain solvent? Will homeowners be able to rebuild? Should they? Will another catastrophic storm hit this season? (Hurricane season doesn’t officially end until Nov. 30, 2024.) When I dug into the data, the answers to these questions was not at all what I expected to find. Below are the topics we will cover in this blog.
And here is more information on each point. Which Company Has the Most Exposure? The largest property insurance provider to Florida residents is not a company you’ve heard of. It’s a not-for-profit, tax-exempt, government entity named Citizens Property Insurance Corporation. This NGO had almost 20% of the market share in 2023. There has been ample speculation that the organization will have to raise premiums from Florida residents or receive a bailout from the federal government. According to Senator Sheldon Whitehouse, who serves on the Senate’s Budget Committee, the committee is leading an investigation into the viability of Citizens. Michael Peltier, a spokesperson for Citizens, said that the company “has the financial resources to handle claims from hurricanes Milton and Helen without needing to levy any surcharges or assessments” (source: CNN). (Time will reveal the truth.) There are private insurance companies with exposure to Florida. However, as Fitch Ratings explained in their press release on Oct. 10, 2024, “Most large national underwriters do not have substantial market share in Florida and have cut policies in force via non-renewals to manage balance sheet exposure and reinsurance program costs.” The companies also managed risks by jacking up rates, making the price of coverage unaffordable, particularly for low-income families. How Many Uninsured Homes Are There? According to a study by ConsumerFed.org, at least 10% of Florida’s homes are uninsured. That’s likely a low estimate because the study was conducted in 2021. Since then “insurance companies have increasingly pulled out of states and homeowners have had to contend with double-digit rate hikes,” according to the research of ConsumerFed. As might be expected, the people without any insurance are those who need the funds most. According to the study, owners of manufactured homes (35%), people who inherit their homes (29%), or people of color (11-22%) were the most likely to be uninsured, as were people living in Miami, Houston, Mississippi, New Mexico and Louisiana. FEMA can help uninsured or under insured homeowners in Florida with disaster related expenses. However, the FEMA website underscores that federal emergency assistance is not a replacement for insurance. If you know someone affected by the flooding or wind damages of the hurricane, encourage them to file a claim with FEMA.gov. Just How Catastrophic Will the Losses Be? The losses from hurricanes Helene and Milton are expected to be $30-$50 billion (source: Fitch Ratings). In 2022, Hurricane Ian, a Category 4 hurricane, caused destruction in the range of $60 billion. 4Q 2024 earnings reports from property & casualty insurance companies will reflect the exposure. The quarter may show net losses. Catastrophe budgets will likely be depleted, according to S&P Global. The reinsurance market could be hit hard. However, no rating agency is predicting a meltdown of insolvencies in P&C insurance companies. Rates are likely to jump yet again for homeowners in areas prone to natural disasters. I have yet to see or hear of a 5-star review of an insurance company or FEMA from anyone who has lived through a devastating natural disaster. There are exclusions, deductibles, red tape, and somehow the insured always ends up being short-changed. That is why I’m including a note on Climate Risk below, which factors in some of the costs that many of us are not adding up when we consider moving into a region that is susceptible to annual natural disasters. Weather-Vulnerable Areas When extreme weather events happen regularly, homeowners just get worn out. Insurance costs skyrocket with each costly natural disaster. Property values sink in order to attract new buyers, who may have to pay cash because, without property insurance, they will not qualify for a mortgage. One of the most important things for any new homeowner to do is to look at the climate risks at the bottom of the listing page. For St. Petersburg, Florida, the flood, wind and heat factors are listed at extreme, 10 out of 10. if you’re going to buy in that area, you better have a money tree, a generator, a home on stilts, and a stomach of steel. Click to check out a listing that was for sale at $650,000 in April of this year. The price just dropped to $485,000. This particular homeowner purchased the property in October 2019 for just $340,000, so technically, they are still in the black on the purchase. If the owners are successful in selling their home at $485,000, that would seem like a decent 42.6% gain. However, there are a lot of costs to homeownership that are not factored into that simple math. If we add in broker commissions, closing costs, the cost of the insurance itself, deductibles that kick in with each natural disaster, or the expense of remodeling after four major storms and flooding in four years, it's no wonder that the owners just want out. This homeowner has likely lost a lot of money on the purchase, and there is still a question mark over what price at which they’ll be able to offload the home to someone else. The Wall Street Journal is reporting that there are a lot of homeowners in flooded Florida neighborhoods that are fed up and want to sell. Are There Other Losses (Paper, Long-Term Bonds) That Insurance Companies Should Be Worried About? According to the Financial Stability Report that was released by the Federal Reserve in April of 2024, “because insurance companies are large holders of CMBS* and have material direct exposures to commercial mortgages, a significant correction in commercial property values could put pressure on their capital positions.” According to the same report, property and casualty insurance were less willing to take on the risk, while life insurers continued to invest in long-term holdings with liquidity and credit risk in 2023. This warrants additional scrutiny for any insurance products we own, including annuities, life insurance, etc. *Commercial Mortgage-Backed Securities Anyone who has taken a walk around their city is keenly aware of all of the empty office buildings, mini malls and commercial real estate. This is a sleeping crisis that looks to be concentrated in the commercial real estate industry and the industries that invest in them, including banks (especially regional), insurance companies, pension plans and oftentimes our own managed portfolio. How many of us have been sold into mortgage-backed securities either directly (through long-term, low credit quality or junk bonds and their paper losses) or through bond funds (which can have exposure to commercial real estate)? We’re hosting a Bonds & What’s Safe Masterclass on Saturday, Oct. 26, 2024. It’s important to know what we own and why. Now. Email info@nataliepace.com to learn more and register now. Bottom Line We’ve been hearing about the rapid increases of property values and housing prices that keep hitting new highs. Home prices have been rising since the Great Recession and were on fire in the wake of the pandemic, leading some to forget just how far values dropped between 2006 and 2011. What we hear less about, are the risks that new homeowners take on, particularly in disaster-prone areas, with regard to the high cost of home insurance and the very frequent weather events that can provide significant damage to the home. I outline a 10-Point Checklist for new buyers in The ABCs of Money, 6th edition. Click to read a recent blog on why up to 82% of new homebuyers have buyers’ remorse. The Environmental Defense Fund has put together a Climate Vulnerability Index for the U.S. When areas become uninsurable, due to extremely high insurance prices, frequent and expensive disasters, or elevated home prices, it becomes a lot more difficult to offload the property. Willing buyers will have to pay cash. This puts climate-related risks at the forefront of homebuying decisions. Insurance companies and mortgage companies are smart enough to limit their exposure, putting the majority of the risk back on the homeowner. The back-to-back hurricanes in Florida (that have affected other areas of the South) are unlikely to put insurance companies out of business. However, they certainly could bury a lot of homeowners. Join us at our online Oct. 18-20, 2024 Financial Freedom Retreat and our Bond/What's Safe Master Class Oct. 26, 2024. Learn how to: * Invest in hot industries, such as Nvidia and artificial intelligence, * Hedge against a weaker dollar, * Invest and compound your gains, * Green your retirement plan, * Easy and efficacious nest egg strategies, * Get hot and diversified (including in artificial intelligence and EVs), * Evaluate stocks, * Keep an age-appropriate amount safe, and, * Know what's safe in a Debt World. You'll even discover how to save thousands annually with smarter big-ticket choices. Yes, it's a complete money makeover. Email [email protected] or call 310-430-2397 to learn more and register. Learn the 15+ things you'll master and read testimonials in the flyer on the home page at NataliePace.com. Register with friends and family to receive the best price. "Ten minutes into the first day I was already much smarter about investing than I ever thought I would be in my life and I knew I was in exactly the right place at this retreat. I am amazed at how EASY and FUN it is to make my money work for me and those I love. I think this kind of information should be compulsory in schools. I wish I'd learned this sooner." CM If you’d like an unbiased 2nd opinion on your current wealth plan, email [email protected] for pricing and information. Join us for our Online Oct. 18-20, 2024 Financial Freedom Retreat. Email [email protected] or call 310-430-2397 to learn more. Register with friends and family to receive the best price. Click for testimonials, pricing, hours & details. Join us for our Restormel Royal Immersive Adventure Retreat. March 7-14, 2025. Email [email protected] to learn more. Click for testimonials, pricing, hours & details. There is very limited availability. Register now to ensure that you get the exact room you want. (There may not be an opportunity to register after Sept. 15, 2024.) This retreat includes an all-access pass to all of our online training for a full year for two, and three 50-minute private, prosperity coaching sessions. Much more affordable than you might think. Email [email protected] to learn more. Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The ABCs of Money and The Power of 8 Billion: It's Up to Us, and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 6th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is are the most recent releases of these books. Follow her on Instagram. Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden. Check out Natalie Pace's Substack podcast on Apple and Spotify. Watch videoconferences and webinars on Youtube. Other Blogs of Interest 9 Money Secrets of the Ultra Wealthy. Housing & Budgeting Solutions. Will Boeing Be Booted Out of the Dow Jones Industrial Average? Arkansas Sues Temu for Data Theft. We Must Be the Boss of Our Money. Why? Oil Prices Tumble. Why? Sweepstakes for the Release of The ABCs of Money. 6th Edition. Should You Go Conservative or Aggressive? 5% Yield without those Pesky Paper Losses. The Dow Drops 1400 Points. Fast Fashion. Fossil Fuels. Plastic Clothing. Atacama Desert Waste Dumps. Can Crowdstrike Recover from its Colossal Catastrophe? Featuring a Cybersecurity Overview. Fintechs and Brokerages that Fail are Not FDIC-Insured. Stocks Keep Hitting New Highs. Are You Thinking "Capture Gains?" Nvidia Volatility. Salesforce Drops. Election Years With Negative Yield Curves = ?. 5 Green Tips for Clean Beaches Week. Nio Sales Expected to More Than Double in 2Q 2024. So, You Think You Want to Be a B&B Owner... Artificial Intelligence and Crypto Scam Alert by the SEC. Netflix Evicts Unpaid Viewers. Empty Theaters. Retiring Soon? Start Planning Now. 2024 Rebalancing IQ Test. Answers to the 2024 Rebalancing IQ Test. May is National Bike Month. Paris and Amsterdam are the Stars. AI, Gold & Copper are on Fire. Sunpower Doubled. Sell in May and Go Away? What About the Election? Vacations that Color Our World Forever. The Magnificent 7 Drop to the Fantastic 5 9 Inflation, Budgeting, Debt Reduction and Investing Solutions. China & Russia Double Their Gold Holdings. 2024 Investment of the Year? The Reddit IPO. Meme Stock or Snap Land? Tesla's Factory in Germany Taken Offline by Activists. Bitcoin Sets a New Record High. The Importance of Rebalancing. Beyond Meat's Shares Surge. Quaker Oats' Pesticide Problem. Stocks are Flying High. Why Aren't Mine? Cut Your Tax Bill in Half. 9 Tips. Celebrity Jet CO2. Green Washing. The Facts. Some Solutions. Copper: Essential to the Clean Energy Transition. Uh. Oh. More Bank Trouble. Are Amazon, Square and Other Tech Companies Ripping Us Off? Housing. Unaffordable. What Works? Case studies and creative solutions. Don't Reach for Yield. Closed-End Funds. 2024 Investor IQ Test. Answers to the 2024 Investor IQ Test. Apple's Woes Drag Down the Dow. The Winners & Losers of 2023. Ozempic, Magnificent 7 & Beyond. 2024 Crystal Ball. The Underperforming DJIA, Full of Fossil Fuels and Forever Chemicals. A Spectacular Year for 3 of the Magnificent 7. The Best ROI* (Almost 40%!) & 7 Life Hacks That Save Thousands. Portugal Eliminates Tax Advantages for Ex-Pats. Earn $50,000 or More in Interest. Safely. Finally. WeWork's Bankruptcy. Half-Empty Office Buildings. Problems in our Personal Wealth Plan. Solutions for Unaffordable Housing. Cruise Ships Give Freebies to Investors. Should You Take the Bait? Should You Take a Cruise? Bonds. Banks. The Treacherous Landscape of Keeping Our Money Safe. 7 Rules of Investing 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) Lithium. Essential to EV Life. Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Are There Any Safe, Green Banks? 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. Which Countries Offer the Highest Yield for the Lowest Risk? Why We Are Underweighting Banks and the Financial Industry. Save Thousands Annually With Smarter Energy Choices Is Your FDIC-Insured Cash Really Safe? Money Market Funds, FDIC, SIPC: Are Any of Them Safe? My 24-Year-Old is Itching to Buy a Condo. Should I Help Him? The 12-Step Guide to Successful Investing. The Bank Bail-in Plan on Your Dime. Important Disclaimers Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations. ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience. Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
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AuthorNatalie Pace is the co-creator of the Earth Gratitude Project and the author of The Power of 8 Billion: It's Up to Us, The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She is a repeat guest & speaker on national news shows and stages. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999. Archives
October 2024
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