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(FOX Weather)

Nothing to look at right now, but the various computer forecast models all show some form of disturbance developing in the Caribbean around Halloween. Predictions range from a fairly benign and broad low pressure system to a well-defined tropical storm or hurricane.

The trigger appears to be a strong upper air disturbance that will move into the US Pacific Northwest this evening and eventually turn into a sudden drop in the jet stream that extends into the Caribbean . So the eventual low pressure system, if it forms, will be non-tropical in origin and therefore could take some time to develop, if at all. We will see.

For now, the tropics are taking a break.

Tropical Weather Outlook for the Atlantic as of October 25, 2024.

(FOX Weather)

Over the past few days, a number of readers have drawn the distinction between building better to defend against future hurricanes and paying the incredibly high cost of hurricane insurance in Florida. You build strong once, but the insurance bills never end.

Indeed, insurance has been on my mind ever since Florida Insurance Commissioner Bill Nelson appointed me to a committee looking into the insurance market crisis created by Hurricane Andrew. The committee failed to find a permanent solution and since then the state government, desperate to keep things steady, has tweaked the system, including making it harder to pay hurricane victims, which it hopes will encourage private insurance companies to continue to do so business in Florida.

So the crisis is only deepening, insurance is staggeringly expensive, and the hurricanes of 2024 will likely make things worse.

In 2006, after the onslaught of hurricanes that included Katrina, Rita and Wilma, I published a book called The Hurricane Almanac. Included was a section I modestly called “How I’d Do It Better,” where I addressed some of the systemic challenges of living in the hurricane zone. One of them, of course, was insurance.

Here are my thoughts then on what needed to be done. I think it still applies. The situation only got worse in Florida, and the contagion spread through the hurricane zone.

If you think the idea has merit, I encourage you to contact your local congress and get them focused on solving the problem. Remember, this piece was written from a 2006 perspective.

The only solution to the insurance crisis: a national catastrophe fund

The issue of hurricane insurance is a crisis that is about to turn into a catastrophe in its own right. No “insurance system” as we currently understand the term can ever work for hurricanes because:

• Hurricanes do not occur with sufficient regularity, so a reliable average annual loss number cannot be calculated.
• No matter how big a pile of cash an insurance company has on hand to deal with a major hurricane, it may not be enough if there is a monster storm.
• There could always be another monster storm next week.

This is in contrast to fires and car accidents, for example, which occur with enough regularity that calculations can be made to determine what the appropriate premium must be for the company to pay its claims and make a reasonable profit. These high frequency events are “insurable” because they occur with predictable regularity.

Major hurricanes, devastating earthquakes and serious terrorist attacks, i.e. catastrophes, occur only rarely and therefore do not fit the definition of an insurable event.

Every time there is a major hurricane or series of hurricanes, the rates go up. You have to, because no amount of money is guaranteed to be enough.

Hurricane insurance is really a misnomer. When you pay money to your insurance company to cover you against a hurricane, you’re really just throwing money into a pot and hoping it will be enough. Even though it is guaranteed that this year, next year or another year soon will NOT be enough. The system will collapse and the federal government will have to come bail us out to the tune of billions and billions of dollars.

How would I do it better?

There is only one solution to the problem: a National Disaster Fund. By removing the relatively rare extreme event from the insurance equation, insurance companies can make a reasonable estimate of their maximum annual losses and what they have to pay out.

There are a variety of ways to implement this program, but the key component of any well-established disaster fund system must be incentive. Communities and states should be allowed to participate in the fund — and thus have dramatically reduced insurance rates — only if some or all of the following conditions are met:

• The building code meets a high standard (appropriate to the local threat) and is properly enforced.
• A program of modernization of existing buildings is undertaken.
• A program is undertaken to strengthen the homes of people who, for economic reasons, cannot participate in other programs (many of whom likely do not have hurricane insurance under the current system).
• No new mortgages are granted unless the building sold is brought up to a realistic standard.
• A practical system is created to “rate” individual buildings for loss potential.
• The state creates an increasing scale of insurance based on a building’s “rating.”
• The state has its own disaster fund.

The fund would cover all hurricane losses above a defined amount each year to protect insurers from multiple storm seasons. Because total payouts for any season would be limited, insurance would become more widely available and competition would return to the market.

Many people have a philosophical problem with the government being in the business of insurance. The truth is, however, that insurance companies are not currently in the insurance business when it comes to hurricanes. They are in the business of money and hope.

If the cash pile isn’t enough, they can declare bankruptcy and move on, having taken their profits in hurricane-free years. The state then borrows money, adds a fee to future insurance policies to pay for past storms — further increasing the cost of insurance. The house of cards is growing. It’s a broken system.

The other complaint against creating a federal disaster fund is something like, “The people of North Dakota shouldn’t have to pay for the losses caused by people living in the path of hurricanes.” I have four responses to this concern:

• People in North Dakota and every other state pay anyway. Look at the federal bill for Katrina, Rita, Wilma, Andrew, Hugo and every other destructive hurricane – many many billions of dollars.
• Every state should have a state disaster fund. The size of that fund would vary based on the likelihood of a devastating event occurring in that state. Homeowners in Florida and California, for example, would have a significantly higher catastrophe fund surcharge on their policies than homeowners in Ohio. In the event of a catastrophe, the state fund would be exhausted first.
• By creating the incentive system described above, future losses for everyone are lessened, so there is the potential to save federal money down the road.
• The National Disaster Fund doesn’t cost much unless there is a mega event. But all the while, it provides the necessary incentives to improve national preparedness for a major hurricane, earthquake, or other horrific disaster.

As I said earlier, hurricanes (and earthquakes) are by definition not insurable. Add to that the economic force that high insurance rates create, and there’s even more reason to take action. The money paid out after a disaster only solves the problems caused by that single event – a terribly inefficient system.

Money spent on mitigation to minimize losses protects against all future storms. Lives will be saved, cleanup costs for garden disasters will be dramatically reduced, and we will make a better country.

There is, of course, a federal “insurance” system in place, the National Flood Insurance Program (NFIP). It was created decades ago because governments realized that floods were not “insurable”, for the same reasons hurricanes are not insurable mentioned above. A private insurance system cannot meet the threat. The NFIP program should be reworked and incorporated into the new plan.

Everyone in the system, from insurance companies to informed legislators, knows that there is no way to stop the escalating insurance crisis in coastal areas by simply moving piles of money. Concrete steps must be taken to reduce the risk of an unfinanceable catastrophe in order to attract private money into the system. The sooner Congress moves to the program outlined above, or something similar, the better for the entire country.