Severe Damage Caused by Hurricane Ian Showcases Challenges of Insuring Property in FloridaInsurance Organizations
Hurricane Ian is one of the most severe tropical cyclones recorded to make landfall in Florida. In addition to loss of life, the economic loss is likely to rise above the previous Florida record of $50 billion caused by Hurricane Irma in 2017. Providing insurance on Florida property is a risky proposition because of reoccurring hurricane-related losses year after year. Increased concerns about the consequences of climate change are contributing to rising insurance and reinsurance premiums, which DBRS Morningstar expects to continue for the foreseeable future.
Key highlights include the following:
-- Record damage is expected in Florida following the passage of Hurricane Ian. Economic losses are likely to rise above $50 billion, of which $25 billion to $40 billion could be insured losses.
-- Four out of the past five years have seen some of the worst cases of Atlantic tropical storm losses in history.
-- As providing property insurance coverage in Florida is a challenge, insurers must be selective with the risks that they choose to insure and make appropriate use of diversification and reinsurance.
“Given a storm path and intensity similar to Hurricane Charley and considering the substantial increase in population and property values in Southwest Florida, economic losses could potentially reach above $50 billion, which would be a record for a Florida-centric storm,” said Patrick Douville, Vice President, Insurance. “Claims arising from Ian will support the trend of property risk in Florida being more and more expensive and difficult to insure. Impacts of climate change, such as rising sea levels and coastal erosion, combined with high population and property value growth in coastal areas, will add to the existing woes of the Florida insurance market, which has seen multiple insurer failures in recent years.”