Discussions are swirling in industry and government circles about insurance problems — a lingering effect of multiple hurricane disasters in the past two years.

On Monday, the National Association of Realtors hosted a symposium in Washington, D.C., to discuss a federal role in assuring affordable disaster-insurance coverage, and on Friday the University of Florida’s Center for Real Estate Studies will host an industry conference titled “Florida’s Insurance Crisis.”

Last week, a subcommittee of the U.S. House Committee on Financial Services heard testimony from insurance officials on “Stabilizing Insurance markets for Coastal Consumers.” And Florida Gov. Jeb Bush has been pushing for a special session in the state Legislature this year to focus on insurance problems.

There are reports of soaring rates and dwindling availability for various coverages that serve the real estate market, including homeowners’ insurance and commercial coverages that support the construction trades. Congress is considering several insurance-related bills, though no quick fix is expected and a new hurricane season is already upon us.

Besides the impact of natural disasters, the nation’s economy is also feeling the weight of a general slowdown in the housing market. That slowdown has hit particularly hard in some coastal areas that had experienced feverish, record-setting home-price appreciation and sales just prior to the cooling trend.

The Realtor trade group’s Federal Natural Disaster Policy Symposium on Monday drew about 100 attendees, including government officials and representatives for the home-building, insurance, finance and real estate industries.

While the issue of federal support for a natural disaster insurance program has been talked about in Congress for over a decade, “It seems like there is more discussion, more visibility on this issue than in past years,” said Russell Riggs, a legislative liaison for the Realtor association who helped to organize the event.

Mark J. Washko, senior environmental policy representative for the Realtor group and another event organizer, agreed, “Unlike past attempts to pass this, we’ve got a much broader group of people sitting at the table and saying, ‘We need to do something.’ It’s broader than just an insurance issue. It’s of interest to all American taxpayers.”

Hurricanes Katrina and Rita have certainly helped the cause of those who support federal assistance for an insurance program, as the standard commercial insurance market has dried up while Gulf Coast residents got drenched. The Realtor association has noted that legislators may face opposition from those who believe a federal program would subsidize residents living in disaster-prone areas or would serve as a crutch for the insurance industry.

“There is no ‘silver bullet’ here. It’s going to take a number of different policy approaches to improve preparedness in the country. We’re not just talking about hurricanes, we’re talking about earthquakes … and other types of natural disasters. Clearly there needs to be a variety of approaches,” Riggs said.

During the Realtor symposium, Cynthia Shelton, director of investment sales for Orlando-based Colliers Arnold commercial real estate company, said that buyers “are having difficulty purchasing homes because the cost of insurance on top of a mortgage is pushing housing out of reach,” and “low-income families, renters and condominium owners are feeling the impacts as well.”

And Kevin McCarty, Florida’s insurance commissioner, said during the symposium that the state’s resources “are not sufficient to handle a mega-catastrophe,” noting that eight hurricanes caused about $70 billion worth of insured damage in the Gulf Coast area in 2004-05.

“When a catastrophe hits, it affects far more than insurance companies and the victims of these events. It places stress on the home-builders market, the banking market, land development markets, real estate values, community tax-bases, unemployment rates, and ultimately affects the economic security of all Americans — even those not in the devastated areas,” McCarty said.

A modern equivalent of San Francisco’s 1906 earthquake would cause an estimated $400 billion in damage, while a repeat of the 1938 hurricane that hit New York and the Mid-Atlantic region would deliver a $300 billion blow today, he stated. McCarty has also encouraged federal participation in fostering insurance solutions.

Last week, McCarty and other insurance professionals offered testimony to the U.S. House Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises on the topic of insurance for coastal markets. He noted that in addition to the shrinking availability and ballooning cost of insurance, the reinsurance market (reinsurance contracts allow insurers to transfer all or some risks to other insurers) presents similar challenges.

Studies show that reinsurance rates have risen about 76 percent, on average, across the U.S., “and this while insurers and reinsurers are covering less and less,” he said.

There are more insurance companies exiting the homeowners’ insurance market than are entering, he noted, and insurers are becoming more selective in coverage and by geographic area. South Carolina, he said, has seen rates in the standard insurance market grow 100 percent to 200 percent, with some condos experiencing even steeper increases.

In Florida, the state-created insurer-of-last-resort, Citizen Corp., has about 880,000 insurance policies and insures about $217 billion worth of structures. The corporation had a $1.7 billion deficit last year that required rate increases and a bailout by the state, McCarty said in testimony.

Meanwhile, David Daniel, a representative for the Independent Insurance Agents and Brokers of America, stated in his testimony that population and property values have been growing in areas prone to natural disasters. A risk modeling company reported that the value of insured coastal properties in East Coast and Gulf Coast states totaled $6.9 trillion in 2004, he noted, which amounts to 16 percent of insurers’ total exposure to loss in the country.

“The high costs of recent natural disasters, combined with the fear of future catastrophes, have restricted homeowners’ insurance availability in many markets,” Daniel reported.

And Franklin Nutter, president of the Reinsurance Association of America, said in congressional testimony that reinsurance companies paid out about 60 percent of all insured losses from the three major hurricanes that hit U.S. last year, and reinsurers in the U.S. paid out about $1.44 in loss costs and expenses for every $1 of premium they collected in 2005 while global reinsurers lost $1.20 for every $1 collected.

He noted that sophisticated models of hurricane risks were revised after the 2005 hurricane season “due to new data and a belief that we are entering into an era of increased hurricane frequency and severity,” and these new models reportedly show that Florida has a particularly elevated risk level.

Riggs, of the National Association of Realtors, said a range of proposals are under consideration to help alleviate insurance problems. One proposal would create tax-free personal savings accounts that residents could set aside as a sort of self-insurance program in the event of a disaster, for example, and another proposal would establish a federal “backstop” on insurance that would function somewhat like the federal terrorism insurance program enacted after the Sept. 11 terrorist attacks. That program, established in 2002, was extended in December and is scheduled to end Jan. 1, 2008.

The Realtor association has paid for a study, now in its final stages, that highlights the availability and affordability of commercial insurance in the Gulf Coast region.

A third-quarter real estate survey published last month by the University of Florida’s Center for Real Estate Studies found that insurance was clearly “a leading concern” among respondents.

Steven Ekovich, manager of Marcus & Millichap in Tampa, Fla., stated that there is an “insurance crisis,” with apartment-building insurance climbing about 560 percent in one year, “if you can get insurance.” Office and retail insurance premiums rose to a level that is about 15 times higher than last year.

Ted Starkey, senior vice president for Wachovia Bank in Tampa, said in his comments that there is “huge concern over rising insurance costs which is impeding all property types throughout Florida,” and the “cost of insurance has gone up five times or more in a year, which will have a huge negative impact on rents and property values.” Windstorm insurance for new high-rise buildings doesn’t fully cover the risk, he said, which has forced developers and banks to shoulder the remainder of risk.

And John Priller of the Appraisal Institute said in his survey remarks, “I am already seeing potential buyers choosing to move further inland to avoid the high cost of insurance. I believe the high cost of insurance and property taxes will have more of a deleterious effect on the market than the increasing interest rates.”

Wayne Archer, director of the Center for Real Estate Studies, said there is mounting anecdotal evidence for insurance problems in the industry, and the center is hosting a conference on Friday to further a discussion about insurance problems. The one-day conference will feature a group of panelists from the insurance and real estate development community.

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