Best’s Commentary: Hurricane Milton to Pose Severe Challenge for Florida Property Insurers and Reinsurers

Hurricane Milton poses a significant threat to the Florida property insurers concentrated in the state that lack diversification and therefore are acutely susceptible to significant catastrophic events. According to a new AM Best commentary, the back-to-back punches from hurricanes Helene and Milton could prove too devastating for some of these Florida-concentrated carriers.

The Best’s Commentary, “Hurricane Milton to Compound Losses from Hurricane Helene,” states that economic and insured losses from Hurricane Milton are expected to be significant and amplified by damage caused by Hurricane Helene. “Debris from Hurricane Helene that has not been secured or disposed up of could become airborne once Hurricane Milton makes landfall, exacerbating potential property losses,” said Christopher Graham, senior industry analyst, AM Best.

Diversified, large insurers and reinsurers should be able to absorb losses from Hurricane Milton, depending on the intensity, location and the magnitude of the hurricane; however, property insurers concentrated in Florida could experience a significant loss of surplus. Following hurricanes Irma, Michael and Ian in 2017, 2019 and 2022, respectively, the Florida-concentrated group of property insurers lost more surplus on average than more-diversified companies; in particular, the Florida-concentrated group of property insurers in aggregate lost 24% of its surplus post-Hurricane Ian in a year when a number of insurer insolvencies occurred in the state.

For the Florida-concentrated group of insurers, these storms will have a compounding impact, depending on the losses experienced by individual companies and their reinsurance programs. “The heavy losses will trigger many property catastrophe reinsurance treaties, coming just as reinsurance renewals are being priced for 2025,” said Chris Draghi, associate director, AM Best. “The upcoming January 1 renewals for property reinsurance programs could be more problematic for primary insurers because of the effects of these recent hurricanes.”

The tightening reinsurance market, possible local insolvencies and declining capital among insurers concentrated in Florida will significantly pressure the state’s property insurance market. Citizens Property Insurance Corporation has been making concerted efforts to shed policies to private insurers. However, any cutback in capacity among other insurers will add to the number of property owners covered by Citizens and have further ramifications for the availability and affordability of property insurance in Florida.

The potential damage due to Hurricane Milton, coupled with losses from Hurricane Helene, also could breach the reinsurance program towers secured for the National Flood Insurance Plan (NFIP), along with coverage from in-force catastrophe bonds. Given the anticipated landfall in the Tampa area - a more populated area than the Big Bend area where Helene made landfall - the expectation is that the NFIP is facing a significant claims event, possibly one of its biggest ever losses.

To access a complimentary copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=347560.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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