Hurricane Milton, a powerful Category 3 storm, made landfall near Siesta Key, Florida, on October 9, leaving a trail of destruction across the Tampa metropolitan area. With sustained winds of 120 miles per hour, the storm has led to significant economic damage, with current estimates pointing to nearly $100 billion in total losses, according to Morningstar DBRS. This figure includes both insured and uninsured damages, covering the widespread destruction caused by Milton’s high winds, storm surge, and torrential rainfall.
Economic Toll and Insured Losses
While the total damage figure is staggering, insurers are bracing for losses between $30 billion and $60 billion in insured claims, comparable to the devastating losses incurred by Hurricane Ian in 2022. A significant portion of these losses comes from flooding, especially in the Sarasota and Tampa Bay areas, which were hit by substantial storm surge and heavy rainfall. The National Flood Insurance Program (NFIP) is expected to absorb a large share of these flood-related claims, contributing up to $10 billion of the total insured loss estimate.
The Tampa Bay region is known for its high reconstruction costs, further complicating the recovery efforts. The areas affected by Hurricane Milton are not just economically important but also densely populated, which could make rebuilding a costly and long-term endeavor.
Impact on Insurers
For insurers, the fallout from Hurricane Milton will be substantial, but the extent of the damage will vary. National insurance companies, many of which have scaled back their operations in Florida due to profitability challenges, are expected to face less severe financial impacts. Over the past few years, many large insurers have either reduced their exposure to Florida’s residential insurance market or exited it entirely.
However, smaller and regional insurers may find themselves in a much more precarious position. These companies are likely to experience greater earnings pressure, potentially forcing some to explore new ways to mitigate financial strain. This could include raising premiums, cutting back on coverage, or even facing insolvency in extreme cases.
The state's public insurer, Citizens Property Insurance Corporation, now the largest residential insurer in Florida, is expected to bear a significant portion of the insured losses. Despite this, Citizens remains financially stable due to its ability to levy assessments on current policyholders to cover shortfalls. While this structure provides a safety net for Citizens, it could lead to increased costs for Floridians in the coming years.
Combined Impact of Hurricane Milton and Helene
Adding to the complexity of estimating total losses is the overlapping impact of Hurricane Milton and Hurricane Helene, which struck earlier in the season. Moody’s RMS Event Response estimates that the combined insured losses from both hurricanes could range between $35 billion and $55 billion. Their loss estimation process involves extensive data collection, including aerial imagery and on-the-ground assessments across more than 2,000 miles of Florida’s impacted areas.
Mohsen Rahnama, the chief risk modeling officer at Moody’s, highlighted the difficulties in predicting losses from such complex and overlapping events. “Estimating losses in these events is challenging, and it is important to consider all associated complexities and uncertainties,” Rahnama noted.
The Road Ahead
As Florida begins its recovery from Hurricane Milton, the broader economic and insurance-related impacts are still unfolding. For smaller insurers and regional players, the storm may bring about significant financial challenges, while Citizens Property Insurance will likely play a critical role in stabilizing the market. However, with rising reconstruction costs and the potential for increased insurance premiums, Floridians are likely to feel the effects of this storm for years to come.
The full economic and insured losses from Hurricane Milton will become clearer as insurers and analysts continue to assess the damage in the weeks ahead. For now, both private and public insurers are working to navigate the aftermath of yet another powerful hurricane season in Florida.
Sources:
Morningstar DBRS hurricane analysis
National Flood Insurance Program (NFIP)
Moody’s RMS Event Response findings
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