Florida’s estimated $25 billion to $40 billion in insured losses caused by Hurricane Ian will place more financial pressures on an already stressed property insurance market, those in the industry warn.
One key issue is whether there will be enough capital in the reinsurance market – where reinsurers assume all or part of the risk from insurer-issued policies – to keep regional insurers in Florida solvent as the claims process evolves in the coming year or more, observers say.
“Ian will test the ability of insurers to handle high volumes of claims and will require insurers to access reinsurance and pay any applicable reinsurance retention (deductible) before reinsurance will reimburse losses,” Michael Carlson, president and CEO of the Personal Insurance Federation of Florida (PIFF), told the Florida Record in an email.
The retention mandate applies to both private insurance coverage as well as coverage through the Florida Hurricane Catastrophe Fund, according to Carlson.
“We don’t know if every company will be able to meet their retention requirements but are hopeful that insurers who remain in the market have the capacity to do so,” he said.
Carlson stressed that there remain many uncertainties as property insurance personnel begin the claims review process.
“Unfortunately, given the scope of the devastation, we do not know what mix of claims there will be from Hurricane Ian in terms of flood versus wind losses,” he said. “It is too soon to tell whether this will be more of a wind or water event.”
In addition, homeowners without flood insurance could find themselves without coverage if their losses are determined to be flood-related, according to Carlson.
PIFF is also warning homeowners about unscrupulous repair vendors who promise quick repairs if homeowners sign assignment-of-benefits (AOB) contracts that transfer policy rights to third policies. A reform law signed in 2019 aimed to curtail such predatory tactics, according to the federation.
As the state-run Citizens Property Insurance Corp. has taken on additional policies as private insurers have left the Florida market due to insolvencies, the state’s insurance market has become more vulnerable to future catastrophic storm events, Fitch Ratings reported.