A report from the Florida Office of Insurance Regulation highlights one of the fastest growing risks to re/insurers in Florida, sinkholes. Sinkhole related claims have been rising fast and have been spreading to areas of Florida not previously known for this issue.
211 insurers contributed data to the report and the resulting statistics show that between 2006 and 2010 there have been over 24,671 claims the total cost of which was $1.4 billion. In 2006 claims totalled $209m and that has risen rapidly to total $406m in 2009. 66% of the claims come from the known sinkhole belt area of Florida but an increasing number are coming from areas such as Miami-Dade and Brownward county. In 2010 alone sinkhole claims have increased by 4.2% in those areas.
Sinkholes are driving down profitability for Florida insurers and it seems likely that they are going to increase in frequency even more. The alternative market has an opportunity to step in and with the help of risk modellers at least document the scenarios and weather conditions which can cause sinkholes and provide risk transfer products for the insurers providing this cover.