How extreme weather affects the New York insurance market

Climate change and extreme weather can mean many things to many people. Scorching heat waves, tornadoes and hurricanes, breaking off glaciers and droughts come to mind.

For those in the insurance industry, among the biggest concerns are water and wind, which can lead to homeowner or auto claims.

“When we talk about extreme weather, we’re mostly talking about water and wind,” said Bradford Lahut, director of government affairs for Professional Insurance Agents of New York.

He and other representatives of the homeowners and auto insurance industry testified Wednesday at a hearing in New York on the impact of extreme weather on the state’s insurance market, led by Queens Democratic Assemblyman David Weprin, who chairs the insurance committee. at his conference, and Manhattan Democrat Deborah Glick, who chairs the Environmental Protection Committee.

Speakers pointed to a bleak but not hopeless scenario for the cost and availability of property insurance in New York.

Outrageous price spikes and the phenomenon of insurance companies simply pulling out of a state haven’t affected New York the way they have in Florida, California and Louisiana, they agreed. In fact, New York’s insurance industry has probably gotten healthier over the past decade and a half, said Ellen Melcioni, president of the New York Insurance Association.

For example, Melchioni said, the number of policies in the high-risk pool — which is for those who can’t find insurance anywhere else — fell to 20,904 at the end of October 2023, compared with 55,560 at the end of 2007.

“While affordability may be an issue, particularly for those living in high-risk areas, there is currently no crisis in availability,” she said.

Still, in the absence of changes, New York’s insurance pool could also reach crisis stage.

The government can help combat this, insurance executives said, with a number of initiatives, including some already underway. Vastly expanded drainage systems, for example, would alleviate some of the flooding that inundated parts of New York and the Hudson Valley this year, insurance executives said. Stricter roof construction standards could prevent housing claims, as could planting more trees as windbreaks.

But the group of insurance association lobbyists and advocates at Wednesday’s event also cited New York’s uniquely byzantine insurance regulations as another reason rates are rising and policies, especially in coastal or coastal areas, are increasingly difficult to find.

Take the definition of a windstorm as defined in the regulations used to set deductibles on home insurance. “We want one definition of a windstorm,” Lahut said. While New Jersey and Connecticut have this, New York has more than 100 definitions of a windstorm.

Others decried New York’s highly litigious environment, which means there are many insurance-related lawsuits, creating delays and more costs for insurers.

“You have to correct the legal climate. It’s a huge contributor to insurance costs,” said Scott Hobson, vice president of Big I, a commercial insurance group.
Nor are severe storms only in New York increasing the pace.

Once purchased by the consumer, home and auto policies are resold by the insurance companies to international reinsurance firms, which essentially cover the original insurance firms themselves against losses. This spreads the risk globally. But it also means that a weather disaster overseas, such as a typhoon in Asia, could push New York rates higher because of those reinsurance costs.

“Reinsurance is a huge driver,” Lahut said.

Speaking of red tape, Weprin had some harsh words for the state Department of Financial Services, which regulates insurance.

“I’m very disappointed that the head of insurance is not coming,” Weprin said, referring to Adrienne Harris, Gov. Cathy Hochul’s chief of financial services.

DFS spokespeople, however, said Harris’ office was unable to attend because of a previously scheduled insurance conference based in Florida, and the Assembly hearing was scheduled on short notice.

Lawmakers had many questions about insurance operations. Jacob Blumencrantz, a Long Island Republican lawmaker who is also an insurance broker, said he’s seen homeowners who were longtime insurance customers lose coverage after a bad event like a coastal flood, even though they’ve been faithfully paying their premiums for years okay

Those customers, Blumencrantz said, were being “driven out” too quickly, he suggested.