Hurricane Idalia’s potential $9.36 billion cost threatens Florida’s property insurance market

by | Aug 31, 2023



  • Hurricane Idalia’s impact on Florida’s Big Bend and Gulf Coast regions has led to preliminary cost estimates of nearly $10 billion, with projected insured losses averaging around $9.36 billion.
  • UBS Bank’s analysis indicates a 50 percent likelihood of losses exceeding $4.05 billion and a 10 percent probability of losses reaching $25.6 billion.
  • While Idalia’s impact won’t make it one of the top ten most expensive hurricanes in the US, recovery costs are expected to strain Florida’s property insurance market.

Preliminary cost estimates in the wake of Hurricane Idalia’s pathway through Florida’s Big Bend and Gulf Coast regions is approaching $10 billion, according to a report issued by UBS Bank.

Analysts from UBS bank have projected that the average insured losses resulting from Idalia could reach $9.36 billion, as first reported by Reuters. The estimates were compiled using data as of August 28, with the financial institution indicating a 50 percent likelihood of losses surpassing $4.05 billion and a 10 percent probability of the figure climbing as high as $25.6 billion.

If the estimate holds true, it would exclude Idalia from becoming one of the top ten most expensive hurricanes to hit the United States. For comparison, Hurricane Ian, which made landfall over Southwest Florida last year, accrued nearly $113 billion in total damages as of January.

Recovery expenses are likely to place pressure on Florida’s already feeble property insurance market, which was spread thinner amidst the departure of Farmers Insurance from last month.

A spokesperson for Farmers, Trevor Chapman, told The Capitolist upon the insurer’s exit that the decision solely applies to insurance issued through the Farmers distribution channel. Farmers will continue to provide policy coverage via its subsidiaries, which include Bristol West, Foremost Signature, and Farmers GroupSelect. The secondary branches account for almost 70 percent of the parent company’s business transactions in Florida.

When pressed about the state’s property insurance market on Wednesday during a Fox News appearance, Gov. Ron DeSantis cited last year’s mega-storm as a basis for rate hikes, indicating that more companies are likely to enter the fold later this year, as reported by Florida Politics‘ A.G. Gancarski. This year, four insurers have been authorized to operate in Florida.

“OIR has been diligently working to attract more companies, jobs, and capital to Florida’s insurance market since the passage of recent legislative reforms,” said OIR Commissioner Michael Yaworsky. “We look forward to continuing this momentum and giving consumers more options in the market for homeowners insurance.”

Despite the new entries, Idalia’s impact is particularly concerning for properties deemed uninsurable, as homeowners face exposure to significant risks and potential difficulties in selling their homes.

Insurance holders in Florida are also currently experiencing a one-percent rate hike due to an emergency assessment approved by the Florida Insurance Guaranty Association (FIGA) in April. The evaluation is an additional fee charged by FIGA on its members to raise funds for the payment of covered claims linked to the liquidation of United Property & Casualty Insurance Company last December.

The OIR imposed a similar one percent emergency assessment on all covered lines of business except auto, meaning that all insurance companies in Florida, except for auto insurance, will also be charged the extra one percent fee. However, auto insurance rates are now widely expected to rise in accordance with post-Idalia insurance market trends.

Per the published order, FIGA is borrowing $150 million in short-term financing and will subsequently issue $750 million in revenue bonds to pay off accrued debts and outstanding claims.

It is expected that policy writers will transfer the supplementary fees to their customers, and they have been provided with an unspecified time frame to implement the one percent charge, which will continue until the bond is entirely settled.

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