Last September, when the path of Hurricane Ian altered unexpectedly, millions of people in the Tampa Bay region breathed a sigh of relief. Further south, however, alarm bells were sounding. The storm slammed into another of Florida’s population centers: Captiva, Sanibel, Fort Meyers and Naples. The damage was acute and widespread. Figures from global insurance brokerage AON peg total insured losses for the storm at $52.5 billion, the second-most costly disaster in U.S. history behind Hurricane Katrina, which flooded much of New Orleans and the Gulf Coast in 2005.

Context is important here. Nationwide, for many years, a good rule of thumb for expected annual storm-related insurance losses was approximately $23 billion. That figure is for all carriers across all regions. According to AON data, insured losses for 2013, 2014 and 2015 were $24.1 billion, $23.2 billion and $22.9 billion, respectively. In 2022 that figure was $98.8 billion. In 2021 it was $93.3 billion. And in 2020 it was $81 billion.

Insurance carriers have responded by exiting coastal regions and by eliminating coverage for flooding. It falls to adjusters to determine whether a house was bowled down by water or blown over by wind. It’s been a busy time for insurance restoration specialists and those contractors who will occasionally take insurance work.

Ken Kelly, president of Kelly Roofing and Reliant Roofing in Naples, Florida, said his firm initially needed to focus on the well-being of his staff and their families before they began getting out and helping their customers and the hundreds of people who had called for service. “It’s bad,” said Kelly in an email three days after Ian made landfall. “We’re hiring 500 people, minimum, to handle the workload.”

Kelly’s Roofing, apart from Reliant Roofing, ranks No. 95 on the list posting revenue of $26.4 million on 476 jobs. This is up $4 million from the year prior. Kelly, like other insurance restoration contractors, know from hard experience that as tempting as it may be to take on a huge volume of work in response to a disaster, the result can be catastrophic for a business trying to maintain its profitability. They picked up a lot of business from Ian but not as much as was available.

It was a good call by Kelly. Today, he is reporting that lead flows for discretionary jobs have slowed, and he is focused on watching costs for the remainder of 2023.

“The first half of 2023 was awesome. We had product, pricing was high, and customers were purchasing. That has slowed,” Kelly said. “We have enough backlog to do better than last year by 27 percent or more. However, there is a definite slowdown in the overall economy. Customers are not being approved for financing, mostly due to a high debt to income ratio.

“Our focus is to watch the workload weekly and immediately adjust costs to ensure we maintain profitability. Going into a down economy, one month’s loss can take a year to recover from.”

Away from the coast in Phoenix, Jim Kowalski, owner of Kowalski Construction, says the first half of 2023 has been strong, and he’s not seeing any sign of a slowdown in leads.

“We have a strong backlog, and we’re ahead of sales until this month. We anticipate our revenue will increase over last year and end up where predicted,” said Kowalski, whose firm ranked No. 149 with $17.9 million in revenue on 125 completed jobs. “We have not experienced a slowdown in leads and do not predict that for the balance of the year either.”

As a group, remodelers who focus on insurance restoration fared very well last year. Those on the TOP 500 list generated $2.64 billion in repair and remodeling revenue, up from $2.38 billion a year prior. The group is forecasting more than $3 billion in 2023.

What sets insurance restoration firms apart from most remodelers is their ability to work within the tight cost constraints imposed on them by insurance adjusters. They save money on marketing, spending only 3.7 percent of their revenue to drive leads because most of their business is referred to them by insurance carriers.

Insurance restoration specialists must also be set up to offer emergency services or at least be ready to go at all hours. Big firms like Belfor, No. 1 on the 2023 TOP 500, have the ability to mobilize and pre-position SWAT-like ‘go teams’ who have truckloads of equipment and people ready for when disaster strikes. Their clients know their properties will automatically receive blue tarps on damaged roof tops, or in the case of fire or flood, they’ve got the equipment to quickly dry a premise before mold begins to form in the structure. Insurance specialists also take discretionary remodeling work to boost revenue and profit to smooth out the peaks and valleys inherent in property-loss situations. But if high property-loss levels continue, there will be plenty of work. QR

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