Hurricane Milton risks weigh on Florida-focused insurers in back-to-back impact after Helene
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A man walking in Orlando, Florida, on Oct 9 as Hurricane Milton approaches. Maximum sustained winds of 193kmh could affect an area including Orlando.
PHOTO: REUTERS
FLORIDA – Florida-focused insurers are set to face further strain as Hurricane Milton bears down on the US state’s Gulf Coast just two weeks after Helene battered the region
The back-to-back impact from the two hurricanes could prove devastating for some, with property insurers concentrated in Florida potentially facing substantial losses in their surplus, or assets minus liabilities, a key measure of their financial strength, according to a report from AM Best.
That impact – combined with the waning chances of lower reinsurance rates in 2025 – could add pressure to the property insurance market in Florida and may force some firms to reduce their exposure.
Potential insured losses from Milton are expected to be substantial and could match those of Hurricane Ian in 2022, which amounted to US$60 billion (S$78 billion), according to an S&P Global report. Bloomberg Intelligence analysts estimate that Milton’s path and strength make it possible for insured losses to reach US$100 billion.
In recent years, rising insurance losses in Florida tied to ballooning litigation costs and more frequent climate disasters have driven some insurers out of business or away from the state, forcing home owners to pay higher premiums. While recent reforms of the local legal system helped improve the situation, Milton’s potential damage could reverse that trend.
After a relatively quiet start to the hurricane season, Florida is now bracing for its second in less than two weeks. While Helene made landfall in the less dense Big Bend region, Milton’s maximum sustained winds of 193kmh are headed toward the Tampa Bay region and could impact an increasingly populated area that also includes Orlando.
Insured losses from Hurricane Milton could be amplified by the damage caused by Helene, as the clean-up and repair efforts for the earlier storm are still under way.
“Debris from Hurricane Helene that has not been secured or disposed of could become airborne once Hurricane Milton makes landfall, exacerbating potential property losses,” wrote AM Best senior industry analyst Christopher Graham in the report.
Milton could be the most expensive hurricane in Florida’s history and perhaps US history depending on where it makes landfall, said Mr Ken Johnson, head of the real estate programme at the University of Mississippi School of Business Administration, in an interview with Bloomberg TV on Oct 9.
Depending on the intensity of the storm, national, diversified insurers with some Florida exposure are expected to absorb the potential losses in their earnings, according to AM Best. Bloomberg Intelligence expects the insurers it covers to take an average hit to earnings per share of 15 per cent, as most are not major underwriters in the state.
S&P analysts said those losses could fully deplete the catastrophe budget of the US insurers rated by the agency.
Citizens Property Insurance Corporation, the leading provider of homeowner’s insurance policies in Florida, anticipates it will be able to handle Milton-related claims without levying assessments on policyholders in the state, a spokesman for the firm told Bloomberg News.
Should a major catastrophe require additional funds to cover Citizens customers’ claims, the state-backed insurer has the option to charge an extra premium, called an assessment, to policyholders with other insurers in Florida. BLOOMBERG
