Competition for cheaper flood insurance heating up in Florida
Also, Lloyd’s is more like a stock exchange than an actual private insurer, said R.J. Lehmann, senior fellow at the R Street Institute in Washington, a nonprofit think tank that supports free markets.
“The more competitive the market, obviously the better it will be for consumers to buy private flood insurance,” Lehmann said. The advantage with Lloyd’s is that it has the wherewithal to guarantee its obligations, he said.
The competitive rates would be better for the secondary homeowners, Lehmann said, as those homeowners immediately pay the higher rates and will not see a rollback…
…A small market already existed for private flood insurance because the federal program capped coverage at $250,000 for a single family home, Lehmann said.
“I think you’re starting to see some primary insurers see this as an optional coverage and start in the high-end market and gradually move down a bit,” Lehmann said. “Your State Farms, Nationwides and Allstates are not going to jump into this. It’s the smaller companies that are interested, and interested in doing something that sets them apart.”
The concern with the private insurance industry start-ups in Florida is that many of the companies would likely only be in Florida, concentrating its risk here and not in other states or areas that have a lower flood risk to balance out the policies, Lehmann said.
“What a regulator has to look at is if they have appropriate diversification,” Lehmann said. The insurer could decided to write policies in different states, write different types of insurance or buy reinsurance to help break up the risk, he said.
Reselling parts of the policy would likely become commonplace.
“They’re only keeping a small portion of the risk,” Lehmann said. “They’ll keep 5 or 10 percent on their books.”