Florida’s property-catastrophe insurers face fresh challenges post-Helene

Florida’s property-catastrophe insurers, already under strain with higher reinsurance retentions, could face significant challenges due to the aftermath of Hurricane Helene, Stonybrook Capital has said in an October 4 research note titled “Hurricane Helene: Impact and Next Steps”.

It noted that while there was improvement in loss ratios in 2023, partly on the back of welcomed regulatory reforms in the state, sustainability remains uncertain. As insurers now grapple with the cumulative losses from Hurricane Idalia and now Helene, it could be a testing time for the market.

“The homeowners insurance market in Florida, which was already in crisis, is likely to be further strained as the storm exacerbates existing challenges,” the report said.

It stressed that the rising cost of reinsurance, already a concern before Helene, has intensified the financial burden on insurers. In particular, smaller insurers face increasing challenges as reinsurers raise their thresholds, which in turn heightens exposure for primary insurers. 

Florida’s property-catastrophe writers are particularly challenged as they already are experiencing higher loss ratios compared to national insurers.

The report noted that insurance companies have been scaling back coverage in high-risk areas due to reinsurance costs. But even for those which escaped physical damage, there will be a potential sting in the tail.

“Helene impacted areas not traditionally known for flooding risks.”

“The storm’s lasting impact will come in the form of high premiums and reduced coverage,” the report said.

Another consequence of the storm is likely to be that the extensive flooding and storm surge will lead to increases in the private flood insurance market and National Flood Insurance Program (NFIP).

“Flood insurance rates can be considered as the largest insurance gap in the US,” the report stated. “Although high-risk flood zones are required to have flood coverage, Helene impacted areas not traditionally known for flooding risks, potentially expanding the reach of required flood coverage.”

In terms of insured losses, Stonybrook estimates they will fall between $5 and $10 billion, with half of that probably inland. The NFIP will sustain a large loss, in addition to its estimate for the private market, it stresses. 

It suggests the residential portion of the wind loss will largely fall within the reinsurance retentions of admitted insurers and to the two state-backed plans: Citizens Insurance as a primary insurer and the FHCF as a reinsurer. 

“Reinsurers would see meaningful catastrophe cessions only at the high end of that industry loss range.” 

It estimates that Helene represents approximately a full percentage point to the US consolidated loss ratio. Hurricane Helene is one of the 100 largest insured loss events in the last 75 years, relative to the global economy.

For more news from the American Property Casualty Insurance Association (APCIA) click here.

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