Hurricane Milton may become the storm of a century, but at the least a new Best’s Commentary says it poses a significant threat to an already stressed Florida property insurance market.

Headlined “Hurricane Milton to Pose Severe Challenge for Florida Property Insurers and Reinsurers”, it states that the significant economic and insured losses from Hurricane Milton should be amplified by the earlier damage by Hurricane Helene.

Meanwhile, a Moody’s report has 235,000 commercial properties, valued at $1.1 trillion, as potential targets for at least gale-force winds from Milton.

Best analysts said specifically, property insurers concentrated in Florida that lack diversification are acutely susceptible to significant catastrophic events.

Moody’s projections do not predict the losses or damages Milton will ultimately cause, but they do provide an initial sense of the scope of the commercial real-estate value in the storm’s path.

Significantly exposed will be Citizens Property Insurance Corporation, established by Florida lawmakers in 2002 to provide wind storm coverage and general property insurance for homeowners who could not obtain insurance elsewhere.

Also facing stress will be the Florida Hurricane Catastrophe Fund, the tax-exempt state trust fund that provides reimbursements to residential property insurance companies for a portion of their catastrophic hurricane losses in Florida.

FHCF participation is mandatory for all residential property insurance companies doing business in Florida. The fund’s major objective is protecting and advancing the state’s interest in maintaining insurance capacity in Florida.

Denise Rappmund, senior analyst, Moody’s Ratings, said: “The back-to-back landfalls of hurricanes Helene and Milton in Florida heighten the risk of significant insurance claims for both Citizens and the FHCF, especially with Milton's trajectory towards densely populated west-central areas.

“The expected extensive wind damage could strain FHCF's reserves, despite current resources likely covering these imminent claims. These events also amplify the risk of flooding, adding to the financial and economic strain from clean-up and disruptions.”

Best’s Commentary agrees that the back-to-back hurricane punches could prove devastating.

Christopher Graham, senior industry analyst, AM Best, said: “Debris from Hurricane Helene that has not been secured or disposed of could become airborne once Hurricane Milton makes landfall, exacerbating potential property losses.”

The 2024 storms are bringing just the latest misery for a state in which extreme weather has wreaked havoc.

Analysts believe diversified, large insurers and reinsurers should be able to absorb losses from Milton as an earnings event, depending on the intensity, location and the magnitude of the hurricane. However, property insurers concentrated in Florida could experience a significant loss of surplus.

They say following hurricanes Irma, Michael and Ian in 2017, 2019 and 2022, respectively, insurers focused on Florida property lost more surplus on average than more-diversified companies, including 2022, when the Florida-concentrated group lost in aggregate 24 per cent of its surplus post-Hurricane Ian, leading to several insurer insolvencies in the state.

For the Florida-concentrated group of insurers, these storms will have a compounding impact, depending on the loss experienced by individual companies and their reinsurance programmes.

Chris Draghi, associate director, AM Best, said: “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 programmes could be more problematic for primary insurers because of the effects of these recent hurricanes.”

The tightening reinsurance market, possible local insolvencies and declining capital among insurers concentrated in Florida will significantly pressure the state’s property insurance market.

Citizens has been making concerted efforts to shed policies to private insurers. However, any cutback in capacity among other insurers will add to the number of property owners covered by Citizens and have further ramifications on availability and affordability of property insurance in Florida.

The combined hurricane losses also could breach the reinsurance programme towers secured for the National Flood Insurance Plan, along with coverage from in-force catastrophe bonds.

Best said that given the anticipated landfall in the Tampa area — a more populated area than the Big Bend area where Helene made landfall — the expectation is that the NFIP is facing a significant claims event, possibly one of its biggest losses.

• For more on the Best’s Commentary on the storm threats to the industry, see Related Media

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Best's Commentary -- Hurricane Milton -- October 9 2024.pdf