AM Best estimates that insured losses from Hurricane Helene will likely exceed $5 billion, driven by the storm's extensive wind field and its destructive path across highly populated areas, including Tallahassee, Atlanta, and other urban inland regions.
In a newly issued commentary, titled “Hurricane Helene Challenges Insurers Dealing With Increased Losses and Higher Reinsurance Rates,” AM Best outlines that primary insurers underwriting property coverage will likely absorb most of the losses.
Reinsurers have been pushing for higher attachment points on property coverage, leaving primary insurers more exposed. Florida’s property-catastrophe specialist writers, many of which have been reporting higher loss ratios compared to national property insurers in recent years, may face significant financial challenges.
While there was an improvement in loss ratios in 2023, Chris Draghi, director at AM Best, noted that the market is still in the early stages of an upswing, and sustainability remains uncertain.
In late August 2023, Hurricane Idalia struck the sparsely populated Big Bend region of Florida, and AM Best now believes the combined losses from Idalia and Helene will surpass $5 billion.
Jason Hopper, associate director at AM Best, highlighted that Helene’s wind fields covered a much wider area and were accompanied by coastal storm surges and inland flooding, further increasing potential insured losses. The final magnitude of losses will depend on the extent of wind versus flood damage and any business interruption losses that may arise.
Flood losses from Helene could affect insurers involved in the emerging private flood insurance market and potentially impact the National Flood Insurance Program (NFIP), which is expected to be renewed before its expiration on Sept. 30.
Reinsurers have been adjusting their strategies in recent years, raising rates, cutting capacity, and pushing for higher attachment points in an effort to protect their financial positions. These changes have a more significant impact on primary insurers that rely heavily on reinsurance, making them more sensitive to fluctuations in reinsurance pricing.
National insurers, with their broader diversification and capital reserves, continue to be the largest writers of property catastrophe risk in Florida and are better positioned to absorb losses compared to smaller, more concentrated insurers.
However, the market share of the top 20 insurers, excluding Citizens Property Insurance Corporation, has notably decreased since 2019. Insurers with more than 70% of their total direct premiums written (DPW) tied to Florida catastrophe risk have seen their market share grow from 24% in 2019 to nearly 33% in 2023.
At the same time, Citizens’ market share has increased as national insurers scaled back their exposure in Florida.
Despite this growth, these Florida-focused insurers’ high dependence on reinsurance leaves them vulnerable to changes in reinsurance pricing and availability. While this reliance helps moderate net leverage positions, it can obscure the direct exposure these insurers face.
Unaffiliated ceded premium to policyholder surplus for Florida property-catastrophe specialists remained stable in 2023, marking the first time in five years that surplus growth was not significantly outpaced by ceded premium growth.
What are your thoughts on this story? Please feel free to share your comments below.
