Two hurricanes have hit Florida in recent weeks, exacerbating the state’s home insurance crisis. Insurance experts said the flurry of hurricanes could be a sign of rising insurance premiums across the country. The global reinsurance market is considering the increasing number of climate catastrophes.
Thank you for registering!
Access your favorite topics in a personalized feed on the go. Download the app
By clicking “Sign Up”, you agree to our Terms of Service and Privacy Policy. You can opt-out at any time by visiting our settings page or by clicking “unsubscribe” at the bottom of the email.
Florida has been hit by two hurricanes in quick succession in recent weeks, and home insurance rates are likely to rise even further in the state, which already faces prices nearly four times the national average, insurance experts say. told Insider.
Kyle Ulrich, president and CEO of the Florida Association of Insurance Agents, told BI that “Florida is at much higher risk than other parts of the world.” “And we pay what we deserve.”
But it’s not just Florida.
Home insurance experts said the compounding financial crisis caused by Hurricanes Helen and Milton could also indicate that premium increases are imminent nationwide. They pointed to the recent Florida storms as an example of the increasingly severe and frequent climate change that is wreaking havoc on global insurance markets.
Florida’s battered home insurance market
According to a recent report from insurance comparison shopping site Insurify, home insurance rates have increased across the board in recent years due to a combination of natural disasters and inflation. The overall cost of home insurance increased by nearly 20% from 2021 to 2023, according to the report.
And the average monthly property insurance payment has increased 52% nationwide since 2019, especially for single-family homes with a mortgage, according to the 2024 Mortgage Report from financial services firm Intercontinental Exchange.
The number is even higher in areas with a higher risk of environmental disasters. In California, several major home insurance agencies are withdrawing or limiting operations in the state as the risk of devastating wildfires increases, while tornado-prone states such as Illinois and Arkansas The state says insurance premiums are rising as the frequency of cyclones increases. news.
“Certainly, in regions that are chronically affected by storms, either premiums go up or insurance companies leave completely,” said Jeffrey, a researcher and director of the Columbia Climate School’s National Center for Disaster Risk Reduction.・Schlegelmilch told Business Insider.
But nowhere in the country is the home insurance crisis as severe as in Florida.
The state has been hit by a wave of costly hurricanes in recent years, bringing an influx of new residents and opening up loopholes in the state’s benefit allocation, said Oscar Minier, executive vice president of Renaissance for the Southeast region. He also said that he had been dealing with misconduct related to this. , a national network of independent insurance agents.
Related articles
Miniet said the decline in the number of insurers willing to write policies in areas of the state most affected by hurricanes is largely due to the potential risks outweighing the potential economic rewards. He said that is the reason. Meanwhile, he added, companies that maintain the status quo have extremely strict underwriting practices that result in homeowners paying much more in premiums, especially in at-risk areas.
In Florida cities such as Deltona, Jacksonville and Cape Coral, average insurance payments for mortgaged single-family homes have increased by 90% and 86%, respectively, since 2019, according to an analysis by financial services firm Intercontinental Exchange. , soared to 85%.
Tampa, which suffered severe wind damage when the Milton touched down near Sarasota on Wednesday night and suffered deadly storm surge when the Helen touched down last month, has had no insurance payments since 2019. The Intercontinental Exchange found that the market had increased by 71%.
And insurance experts say things are likely to get even worse for Florida homeowners because of Helen and Milton.
Most of the damage in Helen’s state is due to flooding, which is not included in most home insurance policies.
But Helen also caused wind damage, and Hurricane Milton’s wind gusts were strong enough to tear off the roof of Tropicana Field in Tampa and spawn several tornadoes that tore through central Florida. Unlike floods, wind damage is usually covered by home insurance.
“It’s definitely going to impact insurance premiums in the state,” said Shahid Hamid, a finance professor at Florida International University and director of the Institute for Insurance, Finance and Economics Research at the university’s Hurricane Research Center. Ta. It has increased quite significantly. ”
Home insurance prices continue to rise nationwide
Floridians will bear the brunt of Helen and Milton’s insurance-related pain, but thanks to recent storms and similar climate disasters, homeowners across the country could soon feel the pain in their wallets, too. .
While Milton and Helen were one-off events, storms like this could ultimately impact the broader insurance industry, said Jeremy Porter, head of climate impact research at climate risk assessment firm First Street. speaks.
“When insurance costs go up, they go up not just in the areas where we are affected, but across the industry,” he told Business Insider.
Large insurance companies such as Allstate and State Farm typically suffer large losses after major storms and, as a result, must find ways to cover their losses, Porter said.
“So we’re seeing people in Kentucky and Idaho and other places that aren’t even close to this event see their premiums go up and increase just because of company overhead and additional payments. “Climate change risks must be considered in other regions as well,” Porter said.
But the global reinsurance market is the main reason homeowners across the country see higher interest rates after hurricane season, three insurance experts said.
The reinsurance market, based in London and Bermuda, allows insurance companies to offload some of their risks to reinsurance companies (like insurance companies for insurance companies).
Kyle Ulrich, president and CEO of the Florida Association of Insurance Agents, said rising reinsurance premiums in recent years have been a driving force behind rising premiums nationwide.
Hamid said reinsurance premiums are determined based on global losses, and when prices rise, insurers shift financial responsibility to customers who end up paying higher premiums.
These increases are partially due to climate change. Ulrich said the global reinsurance market needs to assess its risk for catastrophic events around the world, from hurricanes in Florida to tsunamis in Japan.
But as catastrophic climate change becomes more common around the world, homeowners everywhere are running the risk.
“Where we used to have five storms a year, we now have 30 storms. There used to be one strong storm and one weak storm,” said Oscar Seikaly, CEO of NSI Insurance. “There were nine strong storms, but now there are nine strong storms and one weak storm.” The group is one of Florida’s largest private insurance companies. “So the frequency and severity is what has caught the reinsurance industry off guard and thrown them into a bit of a panic.”
Hurricanes Helen and Milton are shaping up to be huge losses, with reinsurance companies potentially facing billions of dollars in claim payouts, resulting in delays in the next renewal period. The reinsurance industry’s ability to supply capital will be reduced. That’s driving up premiums in the primary market, said Yanjun (Penny) Liao, an economist and researcher at the nonprofit research institute Resources for the Future.
“The same thing could happen in unaffected areas because primary insurers everywhere rely on reinsurance,” Liao added.
