Florida insurers are just getting over Hurricane Adalia amid the market downturn

Aug. 31 (Reuters) – Florida-only insurers such as Citizens Property Insurance expect fewer losses from Hurricane Adalia than previous storms in the state, even as industry experts expect more insurers to pull out of the market.

Hurricane Idalia made landfall on Florida’s Gulf Coast on Wednesday, killing three confirmed people and forcing dozens to rescue boats in deep waters, but causing less damage overall than feared.

A spokesman for the insurance company told Reuters that while initial projections of national losses are not yet available, the insurer expects to receive fewer than 10,000 claims arising from damages related to Idalia. That amount is far less than the 68,000 claims citizens received after Hurricane Ian in September 2022.

“Idalia passed through a very rural area of ​​the state, missing out on the urban areas of Tampa Bay and Jacksonville,” the spokesperson said.

Florida citizens and other insurers alone are expected to face billions of dollars in claims from the storm, according to a report by Moody’s on Wednesday, adding to a challenging year for the industry that could lead to higher premiums for customers.

In Florida, UBS Bank (UBSG.S) estimated average insured losses at $9.36 billion with a 50% probability of losses of more than $4.05 billion and a 10% probability of losses of $25.6 billion, based on August 28 data. The broad band reflects possible changes in the storm’s intensity and track.

Moody’s indicated that the losses will rise due to construction costs, which increased significantly during the epidemic, and the high demand for construction workers and materials in the aftermath of the hurricane.

Moody’s said that only Florida’s top 10 insurance companies, which provide coverage for 44 percent of the state’s homes, are more at risk than others due to their geographic concentration.

Despite this, the Insurance Information Institute, an industry research group, told Reuters that the insurance companies’ “adequate levels of reinsurance” make the insurers well-capitalized to pay claims from Idalia.

“This certainly wouldn’t help address the ongoing challenges of the Florida insurance market, but it could have been a lot worse,” said Steve Bowen, chief science officer at Gallagher Reinsurance.

Citizens, the nonprofit, state-backed insurance company in Florida that is seen as an “insurer of last resort,” has been gaining market share since 2022 as primary insurers reduce their exposure to the Florida market.

“As insurance values ​​grow, more exposure to risk in Florida has shifted from larger nationwide insurers to smaller Florida national and local insurers, putting further pressure on the state’s insurance market structure,” Moody’s said in the note.

Regardless, some insurers, including Farmers Insurance, Bankers Insurance and Lexington Insurance, a unit of AIG (AIG.N), have pulled out of Florida due to the risk of huge losses, according to a July report in the U.S. SA Today.

A company spokesperson told Reuters by email that the farmers’ exit would apply “only to policies issued through our agency’s exclusive distribution channel” and 70 percent of its Florida policies would not be affected.

Bankers and Lexington did not immediately respond to requests for comment.

Moody’s said the 10 largest homeowners insurers in the United States such as State Farm and Allstate Corp (ALL.N) only make about 4.1% of their premiums in Florida.

The exit of insurers from Florida comes amid a broader pullout from the market, including reinsurers, according to Fitch’s Aug. 24 report.

“The natural disaster business has become increasingly loss-making in recent years as prices have failed to keep pace with the frequent, severe and volatile weather-related losses caused by climate change,” Fitch said.

Insurers suffered as much as $53 billion in losses from Hurricane Ian in Florida and South Carolina last year, and industry experts predict that insurance companies will go bankrupt and that access to insurance will become less difficult in areas like Florida.

Reuters reported in July, citing the Insurance Information Institute, that six insurers became insolvent in 2022, and more than a dozen others have either left the state or stopped writing new business.

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