Hurricane Idalia insurance claims are expected to cost Florida insurers $9.36 billion after historic landfall

Florida insurance claims stemming from Hurricane Adalia, which historically made landfall on the state’s Gulf Coast as a Category 3 storm, is expected to cost billions of dollars, Reuters reports.

In Florida, UBS estimated insurance losses to average $9.36 billion. Reuters reported that those estimates, based on August 28 data, include a 50% probability of losses of more than $4.05 billion and a 10% probability of losses of $25.6 billion. The broad band reflects possible changes in the storm’s intensity and track.

The $10 billion cost of Hurricane Idalia, once a Category 4 storm, would put the cost outside the list of the ten most expensive hurricanes to hit the United States.

Idalia, now a tropical storm hitting Virginia and expected to head over the Atlantic Ocean Thursday afternoon, lashed Florida’s Gulf Coast with 130 mph winds, torrential rain and strong waves. It also brought massive flooding to the coastal region and continued to rage in southeastern Georgia, where floodwaters trapped some residents in their homes.

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Major floods challenged emergency response crews seeking to tend to trapped residents, and subsequent costs to insurance companies added to a challenging year for the industry. Customers may also feel its effects as it can lead to higher insurance premiums.

Global insurance companies saw a challenging 2023 and blamed the huge losses caused by the Ukraine war and the increase in wildfires and hurricanes in states such as California and Florida. Reinsurers have also raised interest rates on major types of coverage by up to 50% effective July 1.

“Historically what happens when you have these hurricanes is that everyone worries about the liability that follows the hurricane,” Thomas Hayes, chairman and managing director of Great Hill Capital in New York, told Reuters.

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He also said that insurance companies usually raise rates after such natural disasters.

Nationally, reinsurance rates in the United States for policies with natural catastrophe claims rose 30%-50% during July renewals, while in Florida, the increase was 30%-40%, reinsurer Gallagher Re said in July. .

Florida’s natural hurricane season has forced some insurance companies to reconsider doing business there.

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 USA Today report in July.

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Farmers notified the Florida Bureau of Insurance Regulation of its decision to stop offering farmers-branded car, home and umbrella policies in the state on Wednesday, according to a spokesperson.

“This business decision was essential to effectively managing risk exposure,” the spokesperson said. “Farmers offer insurance through many different brands, and this decision only applies to policies issued through our agency’s exclusive distribution channel.”

UBS said in its memo that the departure of the insurers allowed Citizens Property Insurance Corp., a state-backed nonprofit Florida insurer — widely seen as an “insurer of last resort” — to gain market share over the past year.

Michael Peltier, a spokesperson for Citizens Property Insurance, said the company is well-capitalized to fund claims from policyholders whose property is damaged by Idalia.

“There is no problem with paying claims to policyholders,” he said on Wednesday.

Policyholders are encouraged to submit insurance claims through their application or by speaking with a representative.

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Idalia’s ultimate insurance impact may not be known for many more months or years.

Reuters contributed to this report.