November 18, 2024
Doug Wheeler and Conor Ruffin
Recent hurricanes Helene and Milton have brought destruction to parts of Florida and beyond, but residents shouldn’t rush to fear the worst for Florida’s already fragile property insurance market. Though the headlines may focus on rising premiums and market instability, experts suggest a different story: Florida’s insurance market is positioned to weather these storms better than expected. Panic about future unaffordability or a collapse in the market ignores key dynamics at play.
At first glance, it might seem like Hurricane Helene’s landfall as a Category 4 storm on September 25th was yet another blow to the state’s embattled insurance industry. But closer analysis reveals that while the damage is significant, its overall impact on the insurance market will likely be limited. Many homeowners might be surprised to learn that most private insurance policies don’t cover flood damage. This distinction matters: much of the destruction from Helene resulted from storm surge, not wind. The federal National Flood Insurance Program (NFIP), not private insurers, bears the bulk of these flood-related claims. Additionally, wind damage — the type covered by homeowners’ insurance — was not as severe, meaning the feared spike in premiums is not expected. Uninsured losses are also common because many Floridians lack flood insurance through the NFIP, reducing the immediate burden on private insurance companies.
Despite a rocky decade, Florida’s property insurance market is not on the verge of collapse. In fact, recent reforms aimed at curbing litigation abuse and inflated claims are helping stabilize the industry. As the insurance sector gains strength, some experts predict modest rate decreases by 2025 — provided there are no unexpected catastrophes.
Florida’s Citizens Property Insurance Corporation, the state-backed insurer of last resort, provides a telling example. Although it received more than 10,000 claims after Helene, a significant portion of those claims were determined to be improperly reported in terms of what is covered. Despite all of this, Citizens Insurance remains financially stable and will not need to assess non-policyholders to cover losses. This stability reflects the positive impact of recent lawsuit reforms passed by lawmakers, which have reduced the frequency of lawsuits against insurers.
The timing of Hurricane Milton’s approach — just two weeks after Helene — has understandably raised concerns. However, Governor Ron DeSantis and the Florida Office of Insurance Regulation (OIR) have dismissed worst-case projections. Although some Wall Street analysts initially estimated up to $175 billion in insured losses, those dire predictions now seem premature. State officials point out that Citizens Insurance and the broader market are better equipped to handle claims than in previous years. This confidence stems from a combination of reinsurance arrangements, reduced litigation, and a decline in market volatility compared to the crisis following Hurricane Ian in 2022.
“We’ve avoided the once-in-a-lifetime catastrophe,” OIR Commissioner Mike Yaworsky reassured Floridians. “The marketplace is poised to weather the impacts of these storms effectively.”
The Long Game: Why Context Matters
It’s essential to understand that Florida’s property insurance challenges go far beyond any single storm. Premiums have skyrocketed in recent years due to a combination of natural disasters, increased home values, inflation, reduced competition, and a history of legal abuse and disputes. Many companies have chosen to exit the market entirely, leaving Floridians with fewer options and higher costs. Yet, the market’s long-term health is moving in the right direction. New companies are cautiously entering the Florida market, encouraged by legislative reforms and the predicted reduction in lawsuits. Furthermore, the state government’s focus on attracting new insurers and strengthening reinsurance contracts provides a buffer against future shocks.
Rather than fearing the worst, Floridians should take comfort in the resilience of the state’s insurance market. The storms of the past — Hurricane Ian in 2022 and Hurricane Michael in 2018 — left deep scars, but they also prompted necessary reforms that are starting to pay off. With Citizens Insurance financially sound, new insurers entering the market, and lawsuits on the decline, the future isn’t as bleak as it might seem. Yes, challenges remain and insurance premiums will likely remain high for the foreseeable future. But Florida is better prepared for the next storm season than it was in the past. The key takeaway? Don’t let fear drive the narrative. The state’s property insurance market is showing signs of recovery and, with continued efforts, it will be more stable and competitive in the years to come.
