Your windstorm stays on my mind
By Mark Schwed
Palm Beach Post
Jeff and Erin Montgomery live in a tidy little home at the end of a quiet cul-de-sac in Bristol Club,
one of 30-plus communities in the sprawling PGA National development on the western side of
the Florida Turnpike.
They work hard for their money — he sells big trucks, she's a secretary. Together, they had
managed to save just enough for a getaway in Key West.
But now their vacation is gone with the wind, their bank account sucked dry by skyrocketing
insurance bills — all because of Frances and Jeanne and Wilma.
Even though the Montgomerys suffered minimal damage — a 35-foot ficus was uprooted — to
the home they bought for $153,000 five years ago, their homeowners policy jumped from $1,657
to $2,657. Their association assessed each of Bristol Club's 154 homes $1,200 — a total of
$184,800 — to cover blown-down fences and trees. There is the coming tab to bail out the stateowned Citizens Property Insurance Corp., now $1.7 billion in the hole. And they don't even know
how high their windstorm insurance bill will go.
"People had to take a loan out to pay their taxes," says Jeff Montgomery, 52. "How are they going
to pay for this?"
About 10 miles to the east, on the other side of Palm Beach County, David and Sheila Befeler —
both doctors — enjoy a more affluent life. They live in a $1 million-plus Juno Beach home on a
gated street, with a lake at one end of the block and a private path to the ocean on the other.
Yet they are hurting, too, buffeted by $70,000 in repair costs — $30,000 out of their own pockets
— and annual windstorm insurance rates that have ballooned from $5,000 to $10,000 in four
years.
"We work for a living," says Sheila Befeler. "My husband is 71 years old, and he's still working. I
have two kids in college. Not everyone living on the beach is ultra-rich."
Whether you are wealthy or struggling to get by, living in a mansion or mobile home, west of the
Turnpike or east of I-95, insured by State Farm or Citizens, the price of living in paradise just went
through the roof.
And the reason is blowing in the wind.
Whereas New Orleans was devastated by floodwaters last year, Florida took it on the chin two
years in a row from wind.
And now insurance companies want everyone to pay, not just for yesterday's storms, but
tomorrow's, too.
Yelling about premiums
The current insurance crisis is the result of a perfect storm of events.
Eight hurricanes and four tropical storms hit the state in 15 months, causing more than $30 billion
in destruction and resulting in 2.8 million claims.
The Florida Insurance Council says insurance companies paid out more than $63 million a day
during the 2004 and 2005 hurricane seasons. With experts saying this increased "cycle of
activity" could last anywhere from 10 to 100 years, insurance companies are bolting from the
state faster than snowbirds after Easter.
Those companies that remain are jacking up rates and dumping high-risk policies, leaving the
insurer of last resort — state-run Citizens — as Florida's largest, with 815,000 policies and
mushrooming deficits. The Florida Hurricane Catastrophe Fund, which helps private insurers pay
storm-related claims, is running on empty. And a new hurricane season is just weeks away.
If Florida takes a hit for the third year in a row, "we're in big trouble," says Scott Johnson,
executive vice president of the Florida Association of Insurance Agents, a trade group for 1,300
member agencies. He says agents are getting an earful from angry residents. "They're yelling at
us about premiums, the service of Citizens, why they can't find an insurance company," he says.
Windstorm rates for some people have doubled, even tripled, in just two years. How high can
they go?
"I can't answer that," he says.
'We are hurting'
Tom Byrne, 67, knows both sides of the issue. For 35 years, he worked as an insurance agent for
Allstate. Now he's retired, living in a mobile home between the Intracoastal and the ocean in Briny
Breezes. His windstorm bill has climbed from $1,200 to $1,900 since the hurricanes began rolling
ashore two years ago.
But he says the current insurance crisis dates back to Aug. 24, 1992, when Hurricane Andrew
raked South Florida with winds up to 177 mph, causing $26 billion in damage. His company,
Allstate, suffered $4 billion in losses.
"They were a $6 billion company at the time, and they lost two-thirds of their assets in one hour,"
he says. "If that doesn't scare the hell out of a company, I don't know what will."
Tougher building codes were enacted to strengthen new Florida homes and businesses.
Then came the 2004 and 2005 hurricane seasons, and the revelation that this was just the
beginning of a new cycle of more frequent and more ferocious storms.
It's not just Florida's problem, of course. But with eight storms in 15 months hitting it, the state
became ground zero for the insurance crisis. With mushrooming rates and rising deductibles,
people are paying more for less, resulting in a firestorm over windstorm.
"Pretty soon, I'll be paying more wind-damage insurance than taxes on my home," says Robert
Bobek, 63, a retired NASA engineer who spends the winters in Andros Isle in suburban West
Palm Beach. "If my wife didn't have parents and family down here, I wouldn't be here. I'd be at my
home in the northern neck of Virginia on the Chesapeake Bay."
Retired office worker Virginia Lilly, 82, was born in Palm Beach County, but she may be forced to
leave. Her modest home in West Palm Beach is just east of I-95, where insurance companies
jack up rates because of the proximity to the ocean. "The I-95 designation is silly," she says. The
beach is miles away from her home.
But even though she suffered minimal damage last year — just a leaky roof — her insurance
company canceled her coverage, forcing her to go with Citizens. Her rates jumped from $500 to
$3,000 — $800 for fire, theft and liability, and $2,200 for windstorm.
Her biggest worry? That higher medical bills and higher insurance charges will drive her out. "It's
just ridiculous. It is hurting me," she says. "If I get to where I can't take it, I'll have to move."
Others talk of leaving the state, as well, even as more people move to Florida, and more houses
and condos rise along the coast.
Erin Montgomery, who had to give up her Key West vacation because of rising rates, believes it is
"grossly unfair" for those not insured by Citizens to be billed extra to cover its shortage.
"No one is offering to help bail us out or help subsidize our insurance company," she said in a
letter to Gov. Bush. "We have had to drastically cut back and are hurting."
Byrne says it's gotten to the point where he may self-insure, which means paying off his
mortgage and carrying no windstorm insurance at all. It is a gamble. He'd be betting that high
winds wouldn't flatten his mobile home. The property is worth about $350,000, most of which is
for the waterfront lot. "I could get better odds at the dog track," he says. "But the insurance gives
me peace of mind."
Lawmakers, insurance companies, agents and consumer groups agree that the system is in
crisis, if not broken.
"The whole economy of Florida is based on people getting insurance at reasonable rates," Byrne
says. "You can't artificially freeze rates. You can't keep raising them. The sky's not the limit.
Some creative things need to be done."
Bracing our homes, ourselves
In the Florida Legislature, many solutions are being discussed. There is talk of using a $2 billion
sales tax windfall, generated by post-hurricane spending, to offset increases in Citizens' rates. At
first, Gov. Jeb Bush was reluctant to use taxpayer funds for insurance relief, preferring instead to
lower property taxes. But under increasing pressure, he reversed himself this month, saying he
would support using a projected budget surplus to make up what probably will be a $3 billion
shortage in Florida's system of hurricane coverage.
That would help shore up Citizens, with its $1.7 billion deficit, and the Hurricane Catastrophe
Fund. The fund may need $1.5 billion after all the claims are in.
But that is a short-term solution to a long-term problem. What if, as virtually every expert predicts,
the last two years are just a taste of things to come?
Johnson, whose association represents thousands of insurance agents in Florida, says there is
only one way to hold down rates if the hurricanes keep coming: Harden homes and businesses
so they can withstand 140-mph winds.
"The best we can do in Florida, to make sure we have the lowest rates possible, is to continue to
improve the wind resistance of our homes," says Johnson. He says state lawmakers are
considering a provision that would set up a $100 million endowment for interest-free loans for
people who need to upgrade their homes but don't have the financial ability to do so. But that isn't
enough. "We think $500 million is more like it," he says.
"One thing that rings true from the storms of the last two years is that tougher building codes
work, and it was eminently appropriate that they be implemented," Johnson says. "It is indicative
of the fact that insurance companies are willing to write insurance for homes built since 1994"
when tougher building code requirements were enacted.
17 storms?
Indeed, homeowners can get substantial discounts on windstorm insurance — from 5 percent to
42 percent — depending on everything from what type of hurricane shutters are used, whether
glass-block windows and skylights are protected, which design code the house was built under,
and even what type of roof is on the house, according to bankrate.com.
House Democrats have suggested setting up a state version of the federal flood insurance
program, but for wind, not water. Coverage would be limited to $500,000 per home or business. A
Senate proposal would require snowbirds and the rich (those living in homes worth $1 million or
more) to pay more for Citizens coverage.
Whatever the solutions, speed is of the essence. Storm experts have predicted a double-theaverage hurricane season, with 17 named storms — nine of them hurricanes, five of them
packing winds of 111 mph or more.
"The bottom line is Florida is worth saving," says Byrne, whose waterfront mobile home has
longer studs and smaller windows than normal to protect against hurricanes. "But we have to do
things to save it. We have to stop building buildings that can be torn apart by a hurricane. We just
have to be smarter."