Oscar Seikaly On Insurance Costs and Coverage in Wake of L.A. Fires
'This is going to be the costliest event in the history of the globe.'
By Jeff Ostrowski January 23, 2025 6:40 pm
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Since the pandemic, Florida’s real estate market has been in boom mode. But soaring insurance costs have clouded otherwise sunny skies.
Commercial property insurance premiums have shot up from 50 to 100 percent in the past few years, depending on the property type and location, said Oscar Seikaly, CEO of Miami-based NSI Insurance Group. The trend is raising costs for both landlords and tenants.
“Tenants are having a hell of a time,” Seikaly said. “When they signed the lease, the insurance premiums were a lot lower than they are now.”
The following interview has been edited for length and clarity.
Commercial Observer: How will the wildfires in Los Angeles affect the insurance industry?
Oscar Seikaly: This is going to be the costliest event in the history of the globe. It’s just massive. I don’t care what numbers they’re bringing out now; the total might be four times that.
The reinsurers are the ones who are going to take the brunt. All of the losses are going to wind up in the laps of the reinsurers. What the reinsurers are going to essentially do is turn around and think about how they’re going to price things on a global scale.
We have to think as a society as a whole about where we want to live and how we want to live, and how we’re going to adapt to a changing climate.
It sounds like you’re not skeptical about climate change.
It’s a fact. Look around you. When was the last time you’ve seen so many fires in California? In Florida, we’re experiencing more tornadoes than I remember.
Wildfire risk is distinct from hurricane risk, of course. How do you see the California fires affecting Florida policyholders?
Are premiums going to go up by a lot? No. You’re going to see a slight increase across the board. Everyone else is going to have to pitch in – just like when there are numerous storms in Florida, people in the Midwest pay maybe 5 percent more, even if they weren’t affected by the storms.
For residential properties, many homeowners are considering going bare. How do you advise property owners to think about the risk?
It’s a question of the cost of the asset and how much it costs to protect it. If my house is worth $4 million and my windstorm insurance is only $20,000 or $30,000, I would pay it. But I’ve seen people buying $40 million homes who are surprised that the insurance is so expensive — $500,000 to $600,000, when you include windstorm insurance.
I use the analogy of a Ferrari. I’ve never seen a guy who owns a Ferrari who doesn’t insure it because it’s too expensive. But if you put the premium on a house, they’re very reluctant.
If you’re willing to take the chance, then fine. Risk is an individual decision. I would never take that chance, personally. What’s the amount you feel comfortable with? Each person has a different idea about risk.
There’s a thought that soaring insurance costs will slow Florida’s real estate boom. Do you see any relief in sight?
Yes, but relief means rates are going to stay the same and stabilize. People think rates are going to come down; they’re not going to come down. The reason is you don’t have enough companies in the marketplace competing for business. Why? Because everybody’s afraid of coming into the market.
Jeff Ostrowski can be reached at jostrowski@commercialobserver.com.
