Re/insurers are bracing for significant losses in the wake of Hurricane Milton, which made landfall in Florida's Sarasota County on Oct. 9 as a Category 3 storm.
The hurricane caused extensive property damage, power outages, and loss of life, as well as prompting mandatory evacuations. The storm's large footprint, combined with its path through central Florida, suggests it will lead to substantial claims for property and casualty insurers.
According to insights from Moody’s, insurers and reinsurers are likely to face elevated losses due to the densely populated areas affected.
While it will take weeks or months to determine the total insured losses, Moody’s expects the impact to hit both primary insurers and the reinsurance market. P&C insurers are expected to see claims from various perils, including wind damage, roof leaks, and business interruption.
Additionally, personal and commercial auto insurers will likely experience losses from flood-related claims, which typically result in total losses for vehicles.
Moody’s said that Florida-only insurers, defined as those with at least 75% of their premiums written in the state, will be among the hardest hit. The top 10 Florida-only carriers account for approximately 50% of the state's homeowners business, and their geographic concentration makes them particularly vulnerable.
These insurers rely heavily on property catastrophe reinsurance to manage their exposures. However, there could be liquidity challenges if delays occur between paying out claims and receiving reimbursements from reinsurers, according to Moody’s.
Reinsurers are also expected to incur losses as Florida is a peak risk zone for property catastrophe reinsurance. Despite the rate increases and tightened terms introduced in recent years, Moody’s estimates that a substantial portion of insured losses from Milton will be ceded to the reinsurance market.
Reinsurers have posted strong results through the first half of the year, which may cushion the financial impact, though higher catastrophe losses could drive up combined ratios in the fourth quarter.
Florida's public insurance entities, Citizens Property Insurance Corporation and the Florida Hurricane Catastrophe Fund (FHCF), are also expected to absorb significant losses. According to Moody’s, Citizens holds 18.5% of the state's homeowners insurance market, with a total insured value of $533 billion as of September 2024.
Citizens entered the 2024 hurricane season with $15.4 billion in claims-paying resources, though losses from Milton may push it toward its $17.7 billion probable maximum loss (PML) for a 1-in-100-year event.
The FHCF provides $17 billion in reimbursement coverage to 145 insurance companies across the state. Moody’s notes that the fund has $6.9 billion in available reserves and $3.25 billion in pre-event liquidity, covering roughly 60% of its statutory limit. However, should losses from Milton exceed expectations, the FHCF could issue more post-event bonds or levy emergency assessments to meet its obligations.
The broader reinsurance market could see adjustments during the 2025 renewal periods if aggregate losses from this hurricane season significantly impact the sector. According to Moody’s, pricing for higher-layer property catastrophe reinsurance declined by 5%-10% earlier this year as additional capacity entered the market. Still, further losses may drive up rates in future renewal cycles to attract sufficient capacity.
Meanwhile, large national insurers with a presence in Florida are expected to manage the losses better due to their geographic diversification, strong reinsurance protections, and significant capital reserves. Moody’s emphasizes that these insurers have reduced their exposure in Florida over the years as part of their risk management strategy.
Disputes over claims related to wind, rain, or flood damage could slow the claims process, leading to potential lawsuits or regulatory intervention. The potential for “demand surge,” where material and labor costs rise due to increased demand, is also likely to contribute to overall losses, Moody’s reported.
With three hurricanes making landfall in Florida in 2024, including Debby, Helene, and Milton, the cumulative impact on the insurance industry will be closely watched. Estimated losses from Hurricane Debby were around $1.5 billion, while Hurricane Helene generated losses between $6 billion and $14 billion.
The full impact of Hurricane Milton is yet to be determined, but it is expected to exacerbate recovery efforts for residents and businesses still reeling from Helene’s aftermath two weeks prior.
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