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The Storm Insurance Gap

U.S. Customs and Border Protection loading disaster relief supplies onto a helicopter.
photo by Kris Groagn, courtesy U.S. Customs and Border Protection

As Hurricane Dorian crept toward and then stalled over the nearby Bahamas during Labor Day weekend, we in Florida braced for a massive blow that never came.

palm fronds downed by Hurricane Dorian.
The extent of the damage at the Elkins’ vacation home.
Photo by Larry Elkin.

By Wednesday, Sept. 4, the storm was bound for the Carolinas. I followed it some 250 miles up the coast to check on our beach vacation home, which suffered nothing more than some downed palm fronds. Along the way I passed at least a dozen convoys of utility crews and their heavy equipment. Some came from as far away as Quebec to help repair our electrical grid in the event they were needed. As it became clear that the storm had missed us, they redeployed to the Carolinas, joined by many of our local crews from Florida Power & Light.

As I have written in the past, we know how to handle hurricanes in Florida. Nothing can stop wind and water when it decides to come ashore, and there is no such thing as a hurricane-proof home (although some of our newer high-end structures come pretty close). No utility grid is hurricane-proof, either. No storm of Dorian’s power has ever been known to stall and sustain itself over a populated land mass, as Dorian did in the northern Bahamas, where the destruction was near total. But even if the storm had scored a direct hit on Florida, we would have been far better equipped to bounce back from it than are our island neighbors.

We have a well-built utility system, for one thing. In most places, utility poles are made of wood; in much of Florida they are built from reinforced concrete. Our wires may come down, but those super-strong poles do not. It is easier to get power back online faster as a result.

utility trucks on the highway under an overcast sky.
A convoy from Quebec northbound on I-95 in Florida,
racing to get to the Carolinas ahead of Dorian.
Photo by Larry Elkin.

This faster recovery is made possible by the utility crews and their motorized heavy equipment, which pour into Florida over the interstate highway system well in advance of the storm. The crews arrange themselves at strategically placed staging locations to get our lights and our all-important air conditioning back online quickly. Their post-storm mobility is facilitated by an extensive network of gas stations with backup generators. These stations also help ordinary civilians get around after the storm to restock refrigerators and pick up repair supplies.

Grand Bahama and the Abacos, the islands hit hardest by the storm, have none of these advantages. In light of flooded airstrips and harbors choked by debris, almost everything that came to those places immediately after the storm had to arrive by helicopter and small boat. Not only was there no fuel available locally, even the basic necessities of life – clean water and food – were in short supply. In the longer term, recovery will be hampered by shortages of workers and places to house them, as well as the more complicated logistics of bringing and distributing necessary equipment, building material and fuel.

But we Floridians have another advantage compared to our island neighbors: insurance and the people to administer it.

When disaster strikes in the United States, insurance adjusters flood into the storm zone from all over the country. They are mainly independent contractors hired by insurance companies to evaluate, document and appraise damage. They coordinate with the insurers’ staff to distribute money almost immediately in many cases. This money funds emergency and interim repairs, and is used to prevent further damage. This is how many property owners are able to promptly hire remediation firms like ServiceMaster to clean and dry property, so it does not become moldy and unsalvageable. These payments also help keep many people in their homes, freeing up hotel space for the repair crews.

Similar property insurance is not widely available or used in the Caribbean islands, not even in the U.S. territory of Puerto Rico. Many individuals there simply cannot afford it. Such insurance as there is primarily covers resorts and similar commercial property, as The Wall Street Journal reported. This coverage is important, because those resorts and the rest of the tourism industry are a vital economic support in the islands. But it isn’t enough. UBS Group AG expects between $500 million and $1 billion in insured losses in the Bahamas, but the Journal noted that the total economic loss due to Dorian will be much higher. The International Federation of Red Cross and Red Crescent Societies estimates that the storm destroyed 13,000 homes in the Bahamas.

With a near miss like Dorian, we were back to normal in most of Florida within hours. The minor repairs to oceanfront property may take a few days, or weeks at most. Even after big storms like Matthew in 2016 and Irma in 2017, most areas were up and running within weeks. The worst-hit were back in business within months. Michael, which struck part of our Gulf Coast as a Category 5 storm last fall, practically wiped out the community of Mexico Beach. Recovery there will probably take somewhat longer, but the process is already well underway.

Rebuilding and recovery will likely take much longer in the Bahamas, despite what will be a substantial aid effort from Floridians with family and neighborly ties, as well as from the U.S. government and charitably inclined people all over the world. As I wrote this late last week, the official death toll had reached 50, with some 2,500 Bahamians and guests still unaccounted for. The humanitarian needs will be exponentially higher than they would have been following similar destruction on the U.S. mainland.

Even in Florida, our system is far from perfect, of course. I have written about my own fights to get my insurer to reimburse me for past storm damage and to get the bank that holds my mortgage to release the insurance funds, even after I completed repairs that I paid for out-of-pocket. Too many Americans have neither adequate insurance nor sufficient savings to cover repairs, and the courts can take a long time to adjudicate disputes and get money where it needs to go. But we are still infinitely better off than our neighbors.

This is why I, along with so many of my fellow Floridians, have donated money and goods to the relief effort across the water. Had the wind been blowing a different way, Dorian might have vented its wrath on us.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book Looking Ahead: Life, Family, Wealth and Business After 55.

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