RMS: Florida hurricane risk reduced by $1.50 per dollar granted to strengthen homes

For every grant dollar provided by the My Safe Florida Home (MSFH) program for strengthening Florida homes, hurricane losses are expected to reduce by as much as $1.50, according to preliminary analysis by catastrophe risk experts Risk Management Solutions (RMS). This equates to a drop of around $140 million in total losses for the approximately 30,000 homes already retrofitted under the program – significantly more than the $93 million so far invested in grants. Furthermore, the impact analysis for the Florida Department of Financial Services shows that targeting grants at the homes that contribute most to overall state risk could push the reduction up to $2.75 for every grant dollar provided.

“This is the first time the effectiveness of hurricane home strengthening has been analyzed on a statewide basis, and results provide a compelling argument that the investments made are beneficial to all stakeholders – that is the State of Florida, individual homeowners, and the insurance industry,” said Michael Young, senior director of mitigation and regulatory affairs at RMS.

“Not only has the My Safe Florida Home program been a great success – with over 400,000 homes inspected and 29,000 homes mitigated – but as this new analysis from RMS shows, the program continues to be a very smart investment.  I am hopeful that this important analysis will be used to determine how the My Safe Florida Home program can best help Florida’s homeowners in the future,” said Florida Chief Financial Officer Alex Sink, whose Department of Financial Services administers the My Safe Florida Home program.

As of this April 2009, less than 1 percent of the 4.9 million homes in Florida have been retrofitted under the $250 million MSFH program.  To add to the current debate about the merits of continuing to fund the program, RMS has made key recommendations to the Department based on its detailed analysis. 

Recommendations

As well as continuing to provide grants to retrofit Florida homes, RMS advises that eligibility for grants should be prioritized for those homes at highest risk.  “Grants are already focused in coastal areas, but allocating them according to specific building types will lower the risk even further – potentially delivering cost reductions of more than two-and-a-half times the My Safe Florida Home program investment,” commented Mr. Young.

RMS also recommends that the grant program is extended to include roof strengthening. The current MSFH program provides matching grants for certain improvements, such as window protection or reinforced garage doors.  However, RMS’ analysis shows that expanding this to include roofing upgrades – such as new high-wind roof covers, roof deck reinforcements, and roof straps on older buildings – will further reduce statewide hurricane risk over time. 

The final recommendation by RMS is that a process should be established for systematically collecting and using in-depth building information for insurance rate-making in Florida. “Detailed building information, including whether properties include roof deck attachments and roof anchors, has been collected for 10 percent of single family homes through the My Safe Florida Home program,” said Mr. Young. “This effort needs to be enhanced, with the ultimate goal being to collect and make available information for the entire single family home population in Florida.”

Results of the preliminary analysis, which is based on the RMS® U.S. Hurricane Model, can be found at www.rms.com.  The full report will be released in the following weeks.