October 17, 2024
Image credit: NOAA
Insured losses from Hurricane Milton are projected to be near $36 billion from wind, storm surge, and inland flooding, according to Karen Clark and Co. (KCC). This estimate, however, excludes insured damage to boats, offshore properties, and losses to the National Flood Insurance Program (NFIP).
Preliminary insured loss estimates for Florida property owners due to the storm were originally predicted by Fitch Ratings to range from $30 billion to $50 billion, the largest insured loss since Hurricane Ian in 2022. Fitch noted, however that “the state appears to have avoided the ‘worst-case scenario’ outlined by analysts, which…forecast as much as $100 billion in insured losses from Milton alone.”
KCC’s estimate, according to Artemis, “comes after Moody’s RMS Event Response pegged the combined insured loss from Helene and Milton at between $35 billion and $55 billion, the majority of which is expected to come from Milton.”
Economic Losses
AccuWeather released a preliminary loss estimate for the total damage and economic loss from Hurricane Milton, predicting it to be between $160 and $180 billion. "This is a preliminary estimate, as the storm effects are continuing to be felt, and some areas have not yet reported complete information about damage, injuries, and other impacts."
Trouble for Florida?
“The Florida Homeowners’ insurance market’s precarious position will weaken further with the destruction generated by Milton,” states Fitch. “The sufficiency of reinsurance coverage is a key concern for Florida homeowners’ specialists given relatively low absolute capital levels, limited business diversification, and questions as to their ability to raise capital following large loss events.”
AM Best reports that “the back-to-back punches from hurricanes Helene and Milton could prove too devastating for some of these Florida-concentrated carriers.” Furthermore, “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.”
Chris Draghi, associate director, AM Best, predicts that the heavy losses will “trigger many property catastrophe reinsurance treaties in advance of reinsurance renewals being priced for 2025. The upcoming January 1 renewals for property reinsurance programs could be more problematic for primary insurers because of the effects of these recent hurricanes.”
Despite the bleak warnings from Fitch and AM Best, however, an article from the South Florida Sun Sentinel cites local experts as stating that the market can “manage losses from Milton and are ready to cover yet another hurricane, if one should come.” The article asserts that critics have taken a dim view of Florida-based insurers’ “heavy reliance on reinsurance, rather than surplus, to remain viable.”
Karen Clark noted in the Sun Sentinel report that “Florida insurers and the reinsurers that protect them use sophisticated tools to understand the probabilities of hurricane losses of different sizes…. So, the losses from Hurricane Milton should not be a surprise, and the event should not have adverse effects on the health of the market.”