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An understanding of Hurricane Idalia’s true financial impact is still months away, but we can provide some preliminary insights into the storm, and what we’re seeing regarding claims as well as provide some initial thoughts on how the insurance marketplace may react.
Idalia is the third hurricane to make landfall in Florida in the last 12 months coming ashore as a major hurricane (CAT 3). Hurricanes are categorized as “major” when their winds are excess of 110 miles an hour with a storm surge between 6 – 16 feet. Initial estimates are that Idalia had sustained winds of 125 miles an hour and a storm surge between 14 – 16 feet, which officials characterized as catastrophic. Typically, the most severe damage occurs around the eye wall of a hurricane., Effects from Idalia, however, have been felt across hundreds of miles of Florida’s Gulf Coast, as well as major sections of Georgia and the Carolinas
As cleanup begins, the storm’s impact is triggering a number of claims arising from the combined effects of wind, coastal storm surge and heavy flooding caused by extensive rainfall. Wind damage was primarily limited to coastal areas, but flooding was widespread along, and well inland from, the coast, causing extensive damage to homes and businesses and severe erosion and destruction of infrastructure to many bridges and roads. The areas hit the hardest by Idalia were Northern Florida, Southern Georgia, and South Carolina. Early estimates of overall damages caused by Idalia predicted by Moody’s Analytics (RMS) is between $12 billion and $15 billion. While still a significant loss to the insurance industry, the damage estimates for insured losses are likely to be well below what we saw last year with Hurricane Ian – perhaps around $10 billion.
Our initial discussions with major carriers have been positive. With the rate increases seen over the last four years, carriers are in a much better financial position to absorb the losses from Idalia. However, Florida does have several smaller insurance companies operating in the state with limited capital. Any of those carriers with significant exposure to Idalia claims could be put in jeopardy as a going concern. Citizens have also communicated that they feel confident in their ability to pay claims resulting from this storm. Overall good feedback for policyholders.
With three months to go in Hurricane Season, the jury is still out on how 2023 will affect carrier reinsurance renewals. Excluding Idalia, through July of 2023 the marketplace has experienced 15 $1 Billion disasters. This frequency of large loss events will continue to place strain on the insurance marketplace across the country and on carrier reinsurance renewals at the beginning of 2024. These large losses will also cause a shift, similar to Florida, where insureds in affected areas will experience tougher underwriting from carriers with a pullback from riskier cases. Insureds may also experience removal of coverages, increasing retentions, or, worst case, inability to get coverage.
If we can continue through the remainder of the year with no additional storms, Florida should remain on track to see some stabilization of its property marketplace going into the first quarter of 2024.