Hurricane Milton’s Impact on Florida’s Property Insurance Market
Fitch Ratings: Hurricane Milton to Weaken Florida’s Property Insurance Market
Insurance analysis firm Fitch Ratings stated that the losses from Hurricane Milton will further weaken the "precarious position" of Florida’s property insurance market, potentially leading to "hardening" of premiums for policyholders next year.
Estimated Insured Losses
Fitch estimated that Hurricane Milton caused $30 billion to $50 billion in insured losses, making it the most expensive for insurers since 2022’s Hurricane Ian, which caused $60 billion in losses. This brings the combined insured losses to over $100 billion for the fifth straight year, according to the report.
Hardening of Premiums
The report stated that the Florida homeowners’ insurance market’s precarious position will weaken further with the destruction generated by Milton, and that the insurance industry may see a "hardening" of premiums next year. This means that policyholders may face higher premiums.
Reinsurance Concerns
Fitch noted that many Florida insurers will be forced to tap into their reinsurance, which is insurance that Florida insurers must buy each year to ensure they can cover all claims after one or more catastrophes. While most Florida-based insurers are not expected to exhaust their reinsurance assets, the company said that further storms could leave some insurers "exposed."
Losses Above Catastrophe Reinsurance Programs
The report stated that losses above levels that Florida-based insurers can absorb with their reinsurance programs could lead to a rapid erosion of capital, making it necessary for policyholders to pay higher premiums.
Reactions and Rebuttals
Mark Friedlander, director of communications for the Insurance Information Institute, questioned Fitch’s insured loss estimates, citing that Karen Clark & Company, a catastrophe modeler, has not yet released its estimate of Milton’s insured losses. He also emphasized that Florida-based insurers have adequate levels of reinsurance to cover events like Milton.
Joe Petrelli, president of Demotech Inc., which rates the financial strength of most companies in the Florida insurance market, welcomed the news, stating that Floridians appeared to have dodged what could have been a Category 5 Milton bullet.
Conclusion
Hurricane Milton’s impact on Florida’s property insurance market is a cause for concern, with estimated losses ranging from $30 billion to $50 billion. The hardening of premiums, reinsurance concerns, and the potential for some insurers to be left exposed, all point to a difficult year ahead for policyholders.
Frequently Asked Questions
Q: What is a hardening of premiums?
A: A hardening of premiums means that insurance policyholders may face higher premiums due to the increased costs of coverage.
Q: What is reinsurance?
A: Reinsurance is insurance that insurance companies must buy each year to ensure they can cover all claims after one or more catastrophes.
Q: What is the impact of Hurricane Milton on Florida’s property insurance market?
A: The estimated $30 billion to $50 billion in insured losses from Hurricane Milton will further weaken the precarious position of Florida’s property insurance market, potentially leading to a hardening of premiums for policyholders.
Q: What are the concerns about reinsurance?
A: Many Florida insurers will be forced to tap into their reinsurance, and further storms could leave some insurers "exposed," potentially leading to a rapid erosion of capital.
