Why Home Insurance in Florida Is a Mess

Tracy Alloway (0:00)

Hey there, listeners. Bloomberg wants to hear from you. Help make shows like Odd Lots even better by taking the Bloomberg Audience Survey and you can get a coffee on us for doing so. Visit youtube.com/bloombergpodcasts and click the link in our profile or the community section to take the Bloomberg Survey hosted by our partners material. Go to youtube.com/bloombergpodcaststoday.

Jerry Theodorou (0:29)

Bloomberg Audio Studios. Podcasts, radio news.

Tracy Alloway (0:46)

Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:50)

And I'm Joe Weisenthal.

Tracy Alloway (0:51)

Joe, we need to do more on insurance.

Joe Weisenthal (0:54)

Yeah, absolutely. So we are recording this October 18th. In the last several weeks, we've had two extraordinary storms. The second one, Milton, that aimed directly at Florida near Tampa Bay, was not as bad as people thought even a few hours before landfall, which people thought was just going to be tremendously catastrophic potentially. However, it was obviously still quite damaging. And once again, the question of hurricane risk, storm risk, these certain flood-prone markets, who's going to pay for them, all of these things continues to be a source of, I would say, rising anxiety, regardless of what just happened with these storms.

Tracy Alloway (1:36)

Yeah, absolutely. And you've seen estimates flying around for how much this is going to cost the insurers. But I think there was one that said as much as $55 billion from those two storms. So big numbers here. And obviously, people who live in those areas have been talking for a long time about how their insurance premiums are already going up a lot. And certain areas of the country are perhaps becoming unaffordable, or maybe you can't find insurance for a property on the coast of Florida anymore. Or if you do, you have to go to the state insurance body rather than a private entity.

And I think just getting really big picture, I find insurance fascinating because it's basically the original finance, right? It's like the pricing of risk is essentially the very essence of finance. So I find the idea of how we're going to be pricing the risk of more and more storms, who's going to bear those costs. Absolutely fascinating.

Joe Weisenthal (2:33)

Totally. And we know there are structural issues going on in the market, and there are myriad, and we will get into all of them. But yes, there is much to discuss on this topic on this episode, and probably many episodes to come.

Tracy Alloway (2:45)

Okay. So in this particular discussion, we're going to be coming at it from a slightly different angle. We're going to focus on Florida, what's been happening in the structure of that market, and what else could be done. And yes, I promise listeners, there will be discussion about Florida roof insurance frauds and all of that, because there are some interesting things happening there as well. So I'm very happy to say we do in fact have the perfect guest. We're going to be speaking with Jerry Theodorou. He is the Policy Director of Finance, Insurance and Trade over at R Street Institute, which describes itself as a free market think tank. He has written a lot about the Florida insurance market. So Jerry, thank you so much for coming on Odd Lots.

Jerry Theodorou (3:27)

Thank you Tracy, thank you Joe. It's a pleasure to be here.

Tracy Alloway (3:29)

So maybe give us your background just to start, because you've been in the insurance world for a while.

Jerry Theodorou (3:36)

Yeah, thanks. I began my career as a commercial underwriter at Chubb and Sun, and after a couple of years moved over to AIG. AIG shipped me over to Europe, and I worked in Paris and Frankfurt and the Middle East for about 10 years as an expatriate. And after coming back to the United States, I joined a company called Conning, worked at Conning for about a dozen years. Conning is an insurance asset manager that has an insurance research arm. I was one of the researchers there, one of the analysts, wrote a lot of books, did a lot of presentations on the insurance industry. And about three and a half years ago, I joined R Street and using my knowledge of the market and economics and products, connections in the industry for public policy purposes to explain to folks in Washington and state capitals how insurance works and recommended policy solutions for areas that are troubling like the one we're discussing today.

Joe Weisenthal (4:29)

You do sound indeed like the perfect guest. You know, let's say 15 years from now, or let's say not 15 years from now, let's say today I were 16 I'm like, all right, I'm ready to retire. I don't want to live in the cold weather anymore. I just want a nice little house in Fort Myers, Florida. But I kind of want to get it insured because it's a big part of my retirement, this asset. What are my options? What am I going to do?