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Florida Property Owners to Collect About $7.3 Billion in Insurance

Florida Property Owners to Collect About $7.3 Billion in Insurance

By Albert B. Crenshaw
The Washington Post

Property owners in Florida will collect some $7.3 billion in insurance as a result of damage inflicted by hurricane Andrew, making the storm the most costly natural disaster in U.S. history, industry officials said Tuesday.

And those figures cover only Florida and only privately insured losses. Damage to public property _ roads, bridges, schools and federal facilities such as Homestead Air Force Base _ is not included, nor are losses from Louisiana.

Preliminary estimates put overall damage in Florida at $15 billion to $20 billion.

"The dollar amount of these numbers is truly staggering and growing by the hour," said Florida Insurance Commissioner Tom Gallagher.

Andrew packed winds of more than 160 mph when it crashed across the southern tip of Florida before heading across the Gulf of Mexico and into Louisiana. It leveled towns, ruined 85,000 homes and left thousands of other homes temporarily unusable.

"It looks like Hiroshima out there," said Bill Davis of the Insurance Information Institute, a trade group that helped in assessing damages.

Insurance industry officials say their adjusters report that they have never seen such devastation on so wide a scale. Company representatives often cannot find the property they have insured because street signs, addresses and sometimes even the property itself have vanished.

"And if by some chance they are able to hook up with the insured (property owner), and they give him a check, there's no bank to cash it. And if somehow they get cash, there's no store" to spend it in, said Marc H. Rosenberg of the Insurance Information Institute.

"The damage was unprecedented in the United States. The worst I've ever seen," Paul Landers, a veteran claims specialist for State Farm Insurance, told the Reuter news agency.

The $7.3 billion in insured losses dwarfs $4.2 billion paid out by insurers for Hurricane Hugo, which crashed through South Carolina, North Carolina and Virginia in 1989. The only other disaster to top $1 billion in recent times was last year's Oakland, Calif., fire, which cost insurers $1.2 billion.

Andrew would even top the damage caused by the great San Francisco earthquake and fire in 1906, which, according to the insurance industry, would have cost $5.1 billion in today's dollars.

In all, some 700,000 insurance claims are expected in Florida as a result of Andrew.

Insurers hastened to reassure policyholders that the industry has enough money to pay claims, and that it will be able to so without disturbing financial markets.

Property insurance companies' assets are "very liquid," Rosenberg noted, and although insurers are handing out initial checks of $500 to as much as $5,000 to devastated homeowners, most of the money will be paid out over the coming weeks and months as claims are settled, damage repaired and homes rebuilt.

Insurers are also concerned that contractors, repairmen and suppliers will attempt to gouge homeowners who need repairs or in many cases the entire reconstruction of their house.

Geico's Nicely said such gouging was widespread in the wake of the Oakland fire. Where construction prices had been between $85 and $95 a square foot before the fire, homeowners were being quoted prices as high as $300 a square foot afterward, he said.

The Insurance Information Institute's Rosenberg said that while the disaster is not likely to cause premium rate increases across the country, homeowners in hurricane-prone areas may well pay more.

Coastlines are becoming more and more built-up and experts expect an increase in large hurricanes in the coming years, so "it's likely to be more expensive to insure coastal property," he said.