Hurricane Harvey and Irma Captive Insurance Ruminations: Some Captive Policies to Consider

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     This is the final post in my series describing the linkages between hurricanes and captive insurance.  The first post detailed the benefits of controlling the claims process while the second focused on the benefits drafting the contract.  Here, I want to focus on three coverages that naturally come to mind when thinking about hurricanes. 

    Property Damage: it’s not uncommon for insurance companies to mandate high deductibles for property coverage in locations prone to natural disasters.  Several years ago, insurers in Florida only sold property polices that had a windstorm deductible equal to the greater of $50,000 or 5% of the property’s fair market value.  This means that a $5 million dollar property had a mandatory deductible of $250,000.  A captive can cover this risk with a deductible reimbursement policy. 

      Pollution: Houston has a robust oil and chemical sector.  Unfortunately, runoff from industrial sites owned by these companies contaminated floodwaters in the city.  Harvey also flooded the city’s sewer system, further tainting floodwater.  And don’t forget the cost of mold damage and subsequent remediation, which not only grows quickly but is also excluded from property policies.  

          Loss of Income: Both Houston and Florida completely shut down during their respective hurricanes.  Businesses obviously lost a large amount of income during this time.  Florida, which has a large tourism business, may have suffered more because Irma hit at the end of the holiday season.  Businesses in both locations would obviously benefit from a loss of income policy – a captive insurance staple.

            These are just three policies off the top of my head.  More obviously exists.