More than a half-million Missourians are at risk because of the contracting earthquake insurance market, Missouri Department of Insurance Director John M. Huff said at a recent insurance symposium in Kansas City.
Huff discussed the near-record level of excess capital in the global reinsurance market and the reinsurance industry's stated desire for writing more catastrophe risk. He contrasted that to the contracting earthquake insurance market in Missouri. Although the reinsurance market is willing to take additional risk, direct writing insurance companies continue to withdraw or restrict their earthquake insurance business, according to Huff.
“Less than one in five homes in Missouri's New Madrid area had earthquake coverage in 2015,” Huff said. “This means more than a half million Missourians are at risk of catastrophic financial loss following an earthquake. Without the insurance industry fueling recovery and rebuilding efforts, Missouri could also suffer an economic catastrophe.”
The department recently released a supplement to its 2015 Earthquake Report that indicated that Missouri's earthquake insurance market continues to shrink while premiums continue to rise.
According to the department, the six-county New Madrid area that is most susceptible to earthquakes has seen a 510% increase in premium costs since 2000. In 2000, a homeowner could expect to pay just $57 a year for earthquake insurance coverage but by 2015, that amount jumped to $348.
The percentage of residents with earthquake coverage in the New Madrid area dropped another two percentage points between 2014 and 2015. More than 60% of homes in the New Madrid area had earthquake insurance coverage in 2000. By 2015, that number plummeted to less than 18%.
Many insurers no longer write new earthquake insurance policies while others have significant underwriting restrictions, making many types of homes ineligible for coverage, according to the department.
The department noted in a statement that traditional homeowners' insurance policies do not cover earthquake damage and that many consumers are under the false belief that the Federal Emergency Management Agency will help them recover should an earthquake hit. Under FEMA's Individual Assistance program, the maximum grant award is $32,900, far less than what most homes are worth.
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