Why Home Insurance may be on the Way Up!

home insurance going up2

Here’s a grim note for the budget: the cost of insuring real estate is going up. Again.

A sure sign: Reinsurance companies – the ones that sell insurance to insurance companies – have increased rates between 10% to 60% for insurance companies in South Florida, local insurance experts said since 2018. Blame big losses in Hurricane Irma, Michael and Maria. That means property owners of commercial and residential real estate near the coasts will likely see their insurance rates increase.

“Insurance companies are off-setting the risk,” said Doug Jones of the nationwide, Coral Gables-based JAG Insurance. “When the cost of goods gets higher they are passing it along.”

Rates started inching up in the third quarter 2019, said Jason Landa, vice president for the South Florida branch of Aon, the London-based insurance company. Reinsurance went up by at least 1% to 5% depending on the level of risk.

“A lot of these claims take time to be paid out from the time that you assess the damage as well as the risk going forward,” Landa said. “From the time that they assess the damages and the time that the claims have gotten paid out, there’s been some lag time because renewals don’t usually come up until the following year. Most people are getting hit at the time of their renewals.”

It’s a nationwide thing, Jones said. “This is not a local problem. It is going up everywhere. But since the risk is higher here than in [some other locations], pricing is going up here more.”

Insurance experts predict that the rate increases will slow sales activity in coast communities, including Miami Beach and downtown.

For real estate investors, Jones said, “What it’s going to do is possibly affect some of the [capitalization] rates. I don’t know if it is going to be as attractive for a sale, but I believe some people are going to be restructuring their portfolios and try to find areas where they can save money in terms of maintenance and other places to try to get the cap rate back to where it was.”

But rate hikes can be ameliorated, said JAG Insurance Principal Fernando Alvarez, by bringing buildings up to code.

“If the consumer is updating their roof and making sure they have hurricane shutters, they are then applying credits to the account which in turn allows them to get a better rate,” he said.

Hurricane-proof windows and LEED-certificate will also help minimize the rate increase, Landa said.

News Source: Miami Herald.

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