Hurricane Ian might destroy Florida’s already vulnerable homeowner insurance market. According to experts, a significant storm like Ian might cause some insurance companies to go bankrupt, making it more difficult for claimants to be compensated.
At least 12 insurance companies have closed their doors in the state since January 2020, including six just this year. The Florida Office of Insurance Regulation has placed nearly 30 other companies on its “Watch List” due to their financial fragility.
According to Jeff Waters, an official at Moody’s Analytics subsidiary RMS and a meteorologist, “Hurricane Ian will challenge the financial capacity of some insurers to sustain losses to their portfolios, particularly smaller Florida providers with significant exposure concentrations in the vulnerable areas.” Florida, according to Waters, is a peak catastrophe area for reinsurers, and those that are exposed will probably suffer substantial losses.
While Ian’s direction and intensity may alter in the coming days, an early estimate places the potential cost of reconstruction at $258 billion, as per CoreLogic, a property analyst. The storm is expected to affect more than 1 million properties along the Florida Gulf Coast.
Several major insurers, including Allstate and State Farm, have decreased their exposure to the state during the past ten years, according to industry analysts, bringing Florida’s home-insurance market to its knees.
According to research from Moody’s Analytics, “Insurers most susceptible to the storm is the Florida-only insurers, who we define that insurance companies that have 75% of their residential and commercial property premiums in Florida.”
The Citizens Property Insurance Corp., a state-run, taxpayer-funded organization, is most at risk. In only the last year, Citizens has seen its policyholders increase from 700,000 to more than 1 million as more neighborhood insurance companies in Florida have shut their doors.
Sen. Jeff Brandes, a Republican from St. Petersburg or a vocal opponent of Florida’s insurance industry, issues a warning to Floridians saying that if Citizens can’t pay its claims, assessments will likely increase on their own insurance policies because Citizens is permitted by state law to charge non-customers to cover claims.
Every Florida resident with a policy—home or auto—should be keeping a close eye on this storm because it might directly affect their financial situation, according to Brandes. He believes Ian will cause premium increases of up to 40% for policyholders the following year.
According to a Citizens representative speaking to ABC News, if Citizens’ first estimate at 225,000 claims plus $3.8 billion of losses holds true, the insurer after last resort would be able to cover all claims with having to impose a “storm tax” on locals.
The former governor of Florida, Charlie Crist, who is challenging the current governor, Ron DeSantis, claims that Florida already has the highest insurance rates in the nation.
“When Florida homeowners most need their insurance, these companies continue to fail because Governor DeSantis allowed them to raise their costs. You pay up pay and pay, but ultimately the insurance company doesn’t stand by you, “In a statement on Monday, Crist said.
A bipartisan insurance policy reform measure that DeSantis signed into law in May provided $150 million in grants for hurricane retrofitting and $2 billion for a reinsurance relief scheme. It forbids insurance companies from denying coverage due to the age of a roof and places restrictions on the number of attorney fees that can be charged for baseless claims and litigation.
DeSantis predicted that floods and storm surges will cause the majority of Ian’s damage during a news conference on Tuesday. DeSantis stated that the Tampa Bay area is at risk because the water has nowhere to go, noting that around a million people in the region are covered by the federal flood insurance program.
Flood damage is often not covered by homeowner policies, and most people who live in flood zones frequently receive insurance from the Federal Emergency Management Agency (FEMA). The majority of private property insurance providers mainly cover wind damage.
DeSantis’ request for just a disaster declaration for a majority of counties in the state was granted by President Joe Biden on Thursday. It consists of low-interest loans to pay for uninsured property losses along with grants for temporary accommodation and house repairs.
According to Moody’s Public Project but also Infrastructure Finance Group vice president Denise Rappmund, “the expense will then be higher because of increasing construction prices and overall inflation.” “FEMA is the primary source of assistance after a natural disaster, but a large portion of the costs to repair and rebuild destroyed property will be borne by properties insurers who might benefit from $2 billion of state-funded reinsurance,” says a report on the topic.
Analysts predict that Hurricane Ian could rank among the four most expensive storms in American history, largely due to the recent population explosion in Florida.
The fastest-growing towns in Florida, Tampa, Fort Myers, and Sarasota, all lie in storm’s path. No state in the eastern United States has seen population growth as rapidly as Florida over the previous ten years. Analysts caution that as the population and number of homes increase, a severe storm may become more costly and damaging.