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At roughly 11:00 a.m., Sag Harbor Firefighters Peter Topping, Mike Labrozzi and Kelly Bailey used a canoe to transport a Bay Avenue, Pine Neck resident and his pets who had become stranded due to rising water during hurricane Sandy on October 29, 2012. MICHAEL HELLER
The 2023 Atlantic hurricane season is predicted to be “near normal.”
The National Oceanic and Atmospheric Administration said ahead of the season’s start that it expects 12 to 17 named storms and five to nine hurricanes this year, with one to four major hurricanes.
If expecting hurricanes isn’t bad enough, the idea that insurance companies are leaving the East End is adding more anxiety to an already potentially volatile environment. Climate change is expected to alter hurricane activity, intensifying related risks across U.S. coastal counties. Over 33 million U.S. properties are at risk of hurricane-force wind damage according to 2023 Hurricane Risk Report global property analytics provider CoreLogic.
“There is a reticence for companies to write coverage for the East End, an area that is predisposed to catastrophic events like Hurricane Sandy,” said Dermot Dolan, CPCU, of the Hamptons Risk Management Insurance Agency in Bridgehampton. Dolan described the present market as “the most difficult in a generation.”
Several well-known carriers have stopped writing new homeowners insurance policies, and others have been dropping longstanding customers or reducing coverage and/or raising rates, noting the risks are too great. Coastal communities in states such as Louisiana, Florida and California are also feeling the pain of carriers leaving.
“The North and South Forks are each classified as a catastrophe zone,” said Toni Quaresima, an account executive at The Morley Agency in Southampton. In the eyes of insurers — experts at recognizing risks — homes within two miles of the water are considered to be in catastrophe zones.
“All signs point to a hurricane season that will impact the continental U.S.,” noted Sean Kevelighan, the president and CEO of the Insurance Information Institute, in a press release. “Residents in coastal states from Maine to Texas are vulnerable.”
There is a difference between a policy cancellation and nonrenewal. An insurer cannot cancel a policy that has been in force for more than 60 days unless you fail to pay the premium or have committed fraud or made serious misrepresentations on your application.
For nonrenewals, either you or your insurer chooses not to renew the policy upon expiration. In New York, an insurance company must give 45 to 60 days’ notice and explain the reason for nonrenewal before dropping a policy. A policyholder can call the insurance company and can file a complaint with the Department of Financial Services for further explanation.
It is possible that an insurer may have dropped a certain line of insurance or is writing fewer policies in your area. Do not assume the nonrenewal is your fault. However, if you did do something that raised the insurance company’s risk considerably, your policy may not be renewed. If your policy is not renewed, you will not necessarily pay a higher premium with another company.
According to the Insurance Information Institute, most people do not realize the risk and power associated with severe weather, such as flooding. Flood waters result in more deaths than any other weather peril. Unlike other weather risks, flooding is not covered by homeowners insurance but needs to be purchased and added to a policy.
Those who have had two water-loss claims within the past three years, such as a burst pipe or sudden leak, will likely be dropped by their current carrier. Under most standard home policies, if water damage occurs suddenly or accidentally from a source within the home, i.e., a burst pipe, it will likely be covered. If the water comes from outside the home, i.e., a storm surge, it will likely not be covered by a standard policy. Flood insurance is offered through FEMA’s National Flood Insurance Program and many private insurers.
Other factors are also at play when it comes to insurers’ decisions not to cover coastal homes. A worsening, more deadly climate and higher building costs have made it difficult to insure properties.
“Higher interest rates have driven up the cost for reinsurance,” Dolan said. Reinsurance companies provide insurance for other insurance carriers as a means of transferring some of the financial risk that comes when insuring property. “It’s a hard market. Rates are rising but we’re still placing business.”
For properties close to the water, some are forced to turn to nonadmitted carriers for coverage. An admitted insurer, also called a standard market carrier, is an insurance company that has been approved by a state’s department of insurance. A nonadmitted carrier operates through wholesale brokers in states where it does not have an insurance license. A nonadmitted carrier will often cover risks that a regular insurer will not; however, since it is not covered by the state, if it becomes insolvent claims may not be paid. Nor is the carrier required to obtain approval for rates, forms and underwriting rules.
If you are buying a home, learn its claims history, including those that have been filed in recent years. Water loss claims can impact whether the property is considered higher risk. Before purchasing a property you can request that the current owner order a Comprehensive Loss Underwriting Exchange, or CLUE, report. This is generated by a claims history database and enables insurance companies to access consumer claims information when underwriting or rating a policy.
A key part of emergency planning is to be sure you have the right coverage to meet your needs based on location and risks for floods and windstorms and certifying that your property is insured for proper value. Periodically check the accuracy of property values by determining construction costs per square foot and/or by obtaining a property appraisal from a qualified third party. You can also calculate estimated losses should property be partially or completely destroyed by a natural disaster. Communicate with your broker to ensure that coverage closely reflects the cost of potential losses. Read the declarations page of your policy. It offers details on how much coverage you have, deductibles and how a claim will be paid.
Comprehensive auto protects vehicle against theft and damage caused by an incident other than a collision including fire, flood, vandalism, hail, falling rocks or trees and other hazards.
Calculate the out-of-pocket cost of replacing wind-damaged furniture, electronics, clothing, collectibles and other personal possessions after a natural disaster.
Creating an inventory of your belongings and their value will make it easier to see if you are sufficiently insured for either the replacement cost or actual cash value of items situated at your residence. A photo or video catalog of your home’s possessions can expedite the claims process.
When a tropical depression reaches maximum sustained winds of at least 39 mph, it is considered a tropical storm and is named. A tropical storm becomes a hurricane when its sustained winds reach at least 74 mph. A Category 2 hurricane has 96-to-100-mph wind speeds. A Category 3 goes from 111 to 129 mph and a Category 4 is from 130 to 156 mph.
