Florida’s coastal real estate boom since Hurricane Irma has not been slowing down at all, as NewStatesman reports. In Miami and nearby waterfront cities, a survey of local records demonstrates that more than 90 luxury high-rise apartment blocks are under construction or have been completed since 2015.
It has all come down to how property insurance protects Florida’s real estate when it comes to disaster. Homeowners spent $10.8 billion on homeowners’ insurance in 2015 in order to protect more than 6 million properties. The total insured value protected by the state’s homeowners’ market was $2.1 trillion, equivalent to the annual economic output of the country of India.
The global insurance-linked securities (ILS) industry has been a key player in converting Florida’s hurricane risk into a financial asset. The catastrophe bond – the most used ILS product – was created after Hurricane Andrew’s Miami struck Flordia’s homeowners’ insurance industry in 1992.
Here’s how the ILS uses it: insurance companies send a portion of the premium they collect from property owners to special trust companies in tax-friendly nations, which then raise money from investors, who agree to repay a given range of losses if disaster strikes.
If this is not the case, investors can walk away with the property owner’s premium, plus a nice profit. This complex financial market provides nearly $90 billion of protection worldwide. Large institutions ranging from the World Bank to the Rockefeller Foundation celebrate ILS as a key financial solution to help humanity adapt to climate change.
The rise of ILS capital has made new financial resources available to Florida’s rocky property insurance market, but it has come at a cost to homeowners in Florida. Floridians pay the highest homeowners’ insurance rates in the nation.
Not to mention the stagnant wages and rising house prices make south Florida cities among the most unequal in the country.
As a result, the housing market and insurance companies are always a complicated matter to deal with, but getting the right agent and the right homeowners or business insurance is just as important as purchasing a home, whether in the state of Florida or the state of Illinois.