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Florida property catastrophe capacity may be on the rebound

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Many observers see improved signs of property catastrophe capacity in Florida for public entity risk managers.

"In Florida, we're actually finding some more capacity this year than we did a year ago," said David L. Marcus, Boca Raton, Fla.-based co-managing director of the public entity and scholastic division of Arthur J. Gallagher & Co.

While it's not a huge amount, "there is more capacity for wind," primarily because of last year's low catastrophe losses. Mr. Marcus said a large public entity can obtain $200 million to $250 million in capacity for a particular risk.

In addition, "we have moderating rates," and depending on the account, there might even be "some slight price decrease," as well as a "very slight" loosening in terms, he said.

Virginia DelLago, senior vp and client executive at Marsh Inc. in Tampa, Fla., said additional capacity is improving the situation in Florida and "helping to provide a little bit of competition right now. It is by no means back to what it was, and I don't know that it ever will be, but I would say this year's definitely an improvement over last year."

Nancy Sylvester, a Baton Rouge, La.-based co-managing director for Gallagher's public entity and scholastic division, said capacity is greater, in part, because there are new insurers in the marketplace.

But "for the most part, I think risk managers are having to be hugely creative with their insurance programs and the amount of risk they're willing to retain, and they're having to be very flexible," Ms. Sylvester said.

Keri Martin, assistant risk manager for the city of Winter Park, Fla., had difficulty obtaining adequate capacity last year. But as the city embarks on its renewal this year, there are some "initial indications that things are calming down," said Ms. Martin, who noted the city is not prone to significant windstorm damage because of its central Florida location.

"The insurers have loosened up a bit and it looks like we're going to be able to get a lot more coverage...for our money this year, so I'm pleased with how things are looking," said Ms. Martin.

"Last year we had capacity issues and this year we don't seem to be facing those kinds of issues," said Joel McPherson, risk manager for the city of Titusville, Fla. However, "We'll be paying more. Whether it's a lot more, we don't know."

This year's renewals were "certainly easier than last year's although the cost is still expensive," said Mark Langdorf, director of risk management for the Brevard County Public Schools in Melbourne, Fla.

The district was able to procure $5 million more in windstorm coverage than it had last year, for a total of $55 million, but paid $900,000 less, said Mr. Langdorf.

However, the district now has a 5% deductible per building, which, for example, could amount to $2.5 million for a building valued at $50 million, as opposed to the flat $1 million deductible it has had in the past. When a district has as many schools as Brevard does, "the potential deductible exposure is just tremendous," said Mr. Langdorf.

Jack Moore, Houma, La.-based risk manager for the Terrebonne Parish School District, which is in the southern part of the state, said last year, "there was zero capacity, so not only could you not really find adequate coverage, when you did find somebody who was willing to write a minuscule amount of coverage, it was for quadruple of what you were paying for full coverage before."

"Now, I can get more coverage, but the arm and the leg that I paid last year? I've got to give them twofold this time," said Mr. Moore.

He noted that in the northern part of the state, "pricing and availability not only improves but becomes affordable."

Doing whatever you can to protect your facilities does help, according to John Williams, director of risk management for the West Palm Beach, Fla.-based Solid Waste Authority of Palm Beach.

Mr. Williams said as a highly protected risk, "We have not had a problem in the last few years securing coverage." In many cases, he said, the authority has gone beyond code to retrofit its buildings, using the latest building methods to achieve lower rates.