The killer hurricane, Helene, has been confirmed as one of the most destructive storms in US history, with a death toll exceeding 120 across several states and hundreds still unaccounted for.

The Associated Press has reported that the worst flooding in North Carolina in a century has left some isolated areas still unreachable, as emergency crews deal with collapsed roads failing infrastructure and widespread flooding.

Calculated insured damage estimates are so far more than $5 billion, while economic damage estimates are rising to $160 billion and observers see this event as a test for the future of hurricane cover in the southeast.

AM Best notes how Hurricane Helene challenges insurers dealing with increased losses and higher reinsurance rates.

That is the name of a new Best’s Commentary that points out the likelihood that primary insurers will face much of the insured losses, given the recent trend by reinsurers to impose higher attachment points on that coverage.

The report said: “This hurricane could also be a key financial test for Florida property-catastrophe specialist writers, some of which are thinly capitalised. These specialists have been reporting higher loss ratios than the national property insurers writing coverage in Florida in each of the past five years, except for 2023.”

Chris Draghi, director, AM Best said: “While there was improvement in 2023, the market remains on the front end of this upswing with sustainability yet to be proven.

In late August 2023, Hurricane Idalia struck the sparsely populated area of Florida’s Big Bend region. Based on insured loss estimates from Idalia, the strength of Hurricane Helene, and potential inland damage, AM Best believes insured losses will exceed $5 billion.

Jason Hopper, associate director, AM Best said: “Helene’s strong wind fields stretched over a much wider area, accompanied by coastal storm surge and inland flooding.”

The actual magnitude of insured losses will depend upon the determination of perils (ie flood versus wind), as well as potential business interruption losses.

Best’s Commentary said flood losses may affect the risk appetite of those insurers providing coverage within the fledgeling private flood insurance market, in addition to impacting the National Flood Insurance Programme, which is expected to be extended before its expiration on September 30.

Over the past few years, reinsurers have increased rates for their coverage, adjusted the capacity being made available, pushed for higher attachment points, and in some cases, sought lower loss limits to protect their financial positions.

Primary insurers with higher levels of dependence on reinsurance have a greater sensitivity to changes in this pricing.

Best's Commentary: Hurricane Helene Challenges Insurers Dealing With Increased Losses and Higher Reinsurance Rates