Insurance buyers in Florida have become reactive in the past two years, dealing with rising premiums and vastly reduced limits. Buyers
have had no choice but to purchase much higher deductibles than in the past. Property owners now understand that if they are affected by a hurricane, even though they have insurance, they will experience a major financial loss to their business.
“It is becoming a cost-effective strategy to proactively implement various loss-mitigation measures,” says Tony Abella Jr., area vice president of Arthur J. Gallagher Risk Management Services.
The availability crisis has been brought on by cumulative losses from seven storms impacting Florida. Most insurance carriers
do not want to insure Florida property — at any price — and the insurers that will are providing less coverage, charging more and
requiring higher deductibles. Additionally they are very selective, favoring the best accounts and most professional brokers, says
Smart Business spoke with Abella about the impact the lack of insurance can have on companies and how property owners can get
the best coverage possible.
What options should a Florida property insurance buyer consider?
Insurance buyers should consider options based on the advice of their insurance expert and the outcome of a catastrophe model. A
catastrophe model is used to determine the probable maximum loss, which helps determine the amount of coverage needed.
- In order to lower your premiums, assume higher wind deductibles. The most expensive piece of wind coverage is the first layer. Total
coverage does not exist, so many insureds are buying the amount of coverage that will cover their probable maximum loss.
- Consider using the Citizens Wind Program in designated areas. Build additional coverage around that base.
- Consider multiple insurers, using a layered quota share. A skilled broker can combine several insurance carriers to provide owners with
the best coverage possible.
- Use a broker with a proven track record with Florida property similar to yours.
- Improve the construction and protection of your risk to make it more attractive to insurers.
How can businesses comply with a lender’s specific insurance requirements in their loan agreements?
Most contractual insurance requirements are outdated. Our experience has shown that if you maintain a dialogue with your lender’s
senior executives and work with your broker to effectively explain your situation, the lenders will work with you in determining an
It is necessary to come to an agreement of what a reasonable and feasible corporate program would look like, given the current market conditions. This process needs to be completed annually because the market is constantly changing in this region.
How can a property owner receive sufficient coverage while reducing cost?
You want to have the most accurate, most credible property information available. Some key items to include are the year of construction and any upgrades or retrofits that have been made — especially to buildings constructed prior to 2001. Roofing systems, impact
windows and other approved protective devices are important to include.
It is important for companies to use balance sheet strengths to take on more risk. A company can assume a much larger wind-storm
deductible and use contingent financing to spread the effects of a loss over several accounting periods.
If a business owner takes steps to reduce potential losses, it is important to invest in site hardening and backup plans that also work
to protect assets. For some companies, loss of power for more than a few hours can cost large sums of money. Investing the money to
recover from such situations sometimes can be more cost-effective than insurance coverage.
What do I need to insure a medium to large Florida property?
- Work with a broker who has experience in your type of property and deals in similar-sized accounts.
- Work with a broker who has the premium volume with important Florida property markets.
- Have an informed buyer help develop accurate construction information, invest in property protection and improvement, and develop a property insurance solution.
- When very little is available, it is not the time to bid. Select a broker in which you have confidence and work together as a team to design the
most cost-effective solution.
TONY ABELLA JR., CPCU, ARM, ARe, MSIM, is the area vice president of Arthur J. Gallagher Risk Management Services and a principal of the Global Property Practice Group. Reach him at