As Florida braces for Hurricane Milton, projected to be a Category 3 or 4 hurricane at landfall, the potential financial impact looms large, with insured losses estimated to reach $100 billion. Analysts from Morningstar DBRS and RBC have played crucial roles in these projections, suggesting that the losses would be substantial.
Citizens Property Insurance Corp., Florida’s state-backed insurer, is at the forefront of concern. It holds policies covering more than half of the total $200 billion at risk in the storm’s path, despite recent efforts to reduce its exposure. This includes a significant number of policies in vulnerable counties like Hillsborough, Pinellas, and Sarasota, totaling about $132 billion in insured values. Analysts at Jefferies have highlighted that Citizens has been actively reducing its policy count, yet it remains the state’s largest insurer with over a million policies statewide.
The concern is not just the immediate damage but also the financial aftermath. With approximately $14.4 billion in claims-paying resources, including surplus funds, reinsurance, and the Florida Hurricane Catastrophe Fund, Citizens might still fall short given the magnitude of projected losses.
Governor DeSantis warned in August that Citizens Insurance could be insolvent if a major hurricane hit Florida, that prediction looks like the most reasonable outcome with the storms current path. Analysts suggest that this scenario could trigger assessments on a wide range of insurance policies statewide, not just those directly related to property damage. Such assessments would spread the financial burden of recovery across all insurance products in Florida, affecting policies including homes, condos, auto, boat, and pet insurance.
This potential for statewide assessments underlines the significant ripple effects of major hurricanes on Florida’s economy. It affects not only those directly impacted but also every insured individual in the state. These measures, while crucial for stabilizing the insurance market post-disaster, would increase the overall insurance costs for Floridians during a challenging recovery period.
Florida already tops the nation in national home owners insurance rates with an average of $10,996. The situation underscores the need for robust risk management strategies and highlights the challenges of relying on a single insurer for such a significant portion of risk in a hurricane-prone region.
As Milton nears, the stakes are high not only for those in its path but for all stakeholders in Florida’s insurance system. The outcomes of this event could prompt a critical reevaluation of how the state prepares for and finances recovery from catastrophic weather events.
