Sep 29, 2022 - Economy

Property insurance costs skyrocketing in Florida as Hurricane Ian wreaks havoc

Illustration of a house in a deflating life preserver floating in water

Illustration: Sarah Grillo/Axios

Hurricane Ian is expected to undermine the already precarious market for property insurance in Florida, supercharging premiums and exposing gaps in coverage.

Why it matters: Ian's trail of wreckage will inevitably trigger a host of insurance claims by homeowners, saddle those without flood coverage with devastating losses and bludgeon the strained finances of the state's insurers.

Driving the news: Property losses from Ian are expected to amount to "one of the largest catastrophic loss events" in U.S. history, likely exceeding $30 billion, says Mark Friedlander, a Florida-based spokesman for the Insurance Information Institute (III).

  • "That’s going to put extreme pressures on the already extremely volatile Florida insurance market," he tells Axios.

Context: As a result of Florida's susceptibility to extreme weather, the state's homeowners already pay the highest average annual homeowners insurance premium at a cost of $4,231, compared with the nationwide average of $1,544, according to the III.

  • Even so, the state's property insurance market has been crumbling, with private insurers in the state collectively having lost more than $1 billion for two straight years, the AP reports.
  • Six local insurers have declared insolvency so far in 2022 and another 27 on a state watchlist, according to the III.

The impact: Ian is set to further pressure premiums, which were already up 33% in Florida in 2022, compared with 2021, Friedlander says.

  • He says "it wouldn't surprise us" if the next round of increases tops 50%.
  • "The risk to homeowners does not end once the storm has passed," Don Griffin, a vice president at the American Property Casualty Insurance Association, told USA Today.

Threat level: Most homeowners' insurance policies don't cover flood damage.

  • While Floridians are 4 to 5 times more likely than the average American to have a separate policy covering flood damage — which is typically purchased through a federal authority — still only about 18% to 20% have it, according to the III.
  • "The federally-backed flood insurance is generally mandated for mortgaged homes in flood zones, but people who fully own their homes sometimes decline to get it and it’s less common in areas not usually prone to flooding," the AP writes.

Between the lines: The state-backed Citizens Property Insurance, which now accounts for about a tenth of homeowner insurance policies in Florida, projected before the storm that it would field 225,000 claims totaling $3.8 billion in losses, the AP reports.

  • “Their modeling, based on paying out a lot of money in claims for this, was that they would still have between 4 and 5 billion in surplus. So they view themselves as being able to weather this,” Gov. Ron DeSantis said, according to the AP.

Yes, but: Other, smaller insurers were not well prepared for this scale of devastation and could be faced with insolvency, Friedlander says.

  • Many of them have already been hobbled by the disproportionate number of lawsuits filed against property insurers in Florida, compared with the rest of the country.
  • The market is racked with "rampant roof replacement claim schemes" by "unscrupulous" contractors who typically convince homeowners they have storm damages that they don't have, driving up insurance costs for everyone, Friedlander says.

The bottom line: Homeowners without flood insurance could be left hoping for help from the Federal Emergency Management Agency (FEMA), which has distributed grants in the past to homeowners hurt by hurricanes.

  • But those grants often cover only a "small portion" of damages, Friedlander says.
  • "We could see several thousand Florida families completely devastated financially."
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