Housing Authority Clings To Insurance

By JOHN W. ALLMAN and BAIRD HELGESON The Tampa Tribune

Published: Aug 10, 2006

TAMPA - The first cancellation notice arrived in early 2006. A second followed.

Suddenly, the Tampa Housing Authority found itself in a position familiar to many Florida homeowners lately - fighting to retain adequate property insurance coverage as more and more companies flee the state.

Housing officials said they were able to avoid having a portion of the coverage canceled, but still expect the agency's annual insurance premium to jump from $1.09 million to more than $2 million, beginning in October.

That spike is forcing the authority to consider further reducing the amount of coverage it carries. The less coverage it buys, the more likely taxpayers could be burdened with rebuilding public housing if a major hurricane thrashes the city.

Experts would argue the housing authority is already underinsured - carrying insurance up to $50 million on property valued at $190.7 million.

In addition, the majority of housing residents don't have rental insurance, meaning that their belongings are not covered in the event of disaster.

Jerome Ryans, housing authority president, said he is not as worried about major hurricane damage as he is for the agency's properties in Hillsborough County flood zones. Ten housing complexes are in hurricane evacuation zones.

Some housing officials said they think the chances are negligible that a catastrophic storm would exhaust Tampa's coverage.

"I'm not sure we'll ever see that kind of storm," said Martin Williams, the housing authority's director of human resources, who also leads the agency's efforts to buy insurance.

If it did happen, however, Williams said the authority would rely on the federal Department of Housing and Urban Development to help pay for damage not covered by insurance. He said that Tampa's housing authority is essentially banking on the federal government to serve as a last layer of catastrophic insurance.

"With that kind of destruction, HUD will definitely come in and help out," Williams said. "There will still be poor people who need housing. That's what they are there for."

HUD officials did not return calls for comment.

"You can't depend on HUD and expect them to give you emergency funding," said Bill Lewellyn, a vice president of the Housing Authority Insurance Group of Cheshire, Conn., which provides coverage for about 1,300 housing authorities across the nation.

Few public housing buildings in Louisiana and Mississippi have reopened after Hurricane Katrina, Lewellyn said, and the lack of federal funding could mean that at least 30 percent never will.

Skimping On Coverage

Katrina caused more than $450 million in damage to housing authority buildings in New Orleans and along the Mississippi Gulf Coast, about five times what HUD spends a year overhauling low-income housing developments across the nation.

That was just one storm during a two-year period of devastating hurricanes in 2004 and 2005 that caused property insurers to reduce coverage and dramatically raise rates.

For instance, Allstate Floridian, the state's third largest insurer of homes, decided last year to drop all 16,000 commercial properties it covered.

Most Florida housing authorities, such as Tampa, buy policies from companies that rely heavily on reinsurance - coverage that insurers buy to protect against catastrophic losses.

The Tampa Housing Authority has cobbled together policies from six insurers for its $50 million in coverage, Williams said.

The coverage is broken into three layers that can be tapped depending on the extent of the losses. Landmark American Insurance Co. provides the first $5 million in coverage; companies such as Axis Surplus Insurance Co. and Essex Insurance Co. make up the rest.

Experts aren't sure it's wise for taxpayer-backed agencies such as the housing authority to skimp on coverage, especially in a state hit by eight hurricanes in two years.

"Generally, if you can't afford the insurance premium, then you can't afford to be without insurance," said Gary Pullen, executive director for the Florida Surplus Lines Service Office of Tallahassee, a nonprofit group for insurers that cover large commercial properties such as skyscrapers, airports and power plants.

Better Fully Insured

Tampa housing officials have until September to decide what to do.

The authority still is receiving quotes - the best to date being $2.3 million, but it does not include protection from wind or hail, said Kris Warren, senior vice president.

The agency has a reserve fund that it could tap to offset the increased premium this year, she said. If the premiums remain high, however, the authority could be forced to cut programs and personnel.

"Services we provide through management and maintenance could be affected," she said.

Ryans has written HUD Secretary Orlando Cabrera to ask for relief, not only for Tampa but also all housing authorities in Florida. Cabrera has not yet responded, but he will be in Tampa later this month for a statewide housing conference.

Ryans also has suggested several steps to his board of directors, including trying to change the housing authority's renewal date from October to April.

"The rationale here is that negotiating a rate for commercial property in the middle of hurricane season could almost be suicidal," he wrote June 8 to board members. Hurricane season began in June and ends Nov. 30.

Punta Gorda housing officials know it's better to be fully insured.

Hurricane Charley destroyed 154 public housing units when it hit Punta Gorda in August 2004, leaving just 30 units intact. Of the 37 original public housing buildings, only 11 are open today. The rest are vacant slabs awaiting redevelopment. Many residents - most of them elderly - were relocated to other Florida cities.

Insurance adjusters estimated the damage at about $6 million. Even though the properties were fully insured, the housing authority has received only $4 million to date. Housing authority officials have hired attorneys and expect to settle the claim soon.

"It's been a terrible couple of years," said Jean Farino, the Punta Gorda agency's executive director.

For housing authorities considering skimping on insurance, Farino offers this advice: "Don't."

The decision, however, is not always that easy.

"We're trying to figure out whether we're going to cut the grass or keep the property insurance," said Ellen Ramsey, chief financial officer of the Jacksonville Housing Authority. "HUD's not made any indication they are going to bail us out."

Like Ryans, Ramsey said she plans to write HUD and ask about relief for coastal states.

"Whether or not we're successful, I don't know," Ramsey said. "The HUD budget is in really bad shape right now."

If a major hurricane hit and caused significant damage, Ramsey said the Jacksonville agency likely would look beyond HUD to find the money and means to rebuild.

"I don't want to say we're gambling, but I don't know how else you would put it," she said. "It's just not a good situation. I don't know if any of us have any answers."

Reporter John W. Allman can be reached at (813) 259-7915 or jallman@tampatrib.com. Reporter Baird Helgeson can be reached at bhelgeson@tampatrib.com or (813) 259-7668.