How Hurricane Helene Could Have Widespread Consequences for Homeowners

When the Hurricane Helene whipped Florida On Thursday night, it landed in a sparsely populated area The big loop of the state, far from the luxury cities with very expensive beachfront properties to the south. But that didn’t stop Helene from becoming another billion-dollar blockbuster.

The sheer size and scale of the raid left an equally large footprint of destruction throughout the southeast, from region to region. Tampa Bay in Florida until Georgia, Tennessee and the Carolinas. The storm caused between $15 billion and $26 billion in property damage, as well as an additional $5 billion to $8 billion in lost economic output, according to Moody’s analysis. Although it is too early to know the extent of the damage, experts said the storm could have a significant impact on homeowners, the private insurance industry and the federal insurance program. flood insurance.

“In Florida, we’ve seen so many companies go bankrupt because of disasters,” he said. Amy Bachexecutive director United Policy Holdersconsumer advocacy group. As some companies have left the market, new ones have entered. But Bach He said these new players have less experience paying claims and less capital to draw on than the big national insurers. A wave of new claims could discredit them.

“This is not good for anyone: victims, municipalities, FEMA, the market. “

Florida’s insurance market was already in crisis long before the storm, with many residents still waiting to have their storm claims resolved. Hurricane Ianwhich hit in 2022. Before Helene arrived, some insurance companies were already beginning to doubt whether they could withstand Florida’s regular storms. Others had stopped selling new policies in high-risk coastal areas.

These changes in business risk tolerance were happening across the country as the climate change triggered increasingly serious disasters. But this summer, Moody’s He said things seemed to be improving. The property insurance market was becoming stable, as companies raised rates and reduced coverage. “Companies generally have strong balance sheets,” the group said in June.

The rating agency offered a bleaker picture after Helene, warning of rising prices in Florida and more homeowners opting out of coverage or moving out of state.

The cost of homeowners insurance in Florida is already among the highest in the nation.

Three consecutive years of hurricanes hitting Florida’s Gulf Coast “reinforces growing concerns,” he said. Adam Kaminsdirector of economic research at Moody Analytics. “While climate risks alone will not force residents to move from an area, a larger increase in insurance premiums could,” he said.

Ultimately, private insurers are likely to bear the brunt of Helene’s losses because standard homeowner’s and renter’s insurance does not cover flooding, leaving residents without flood insurance with costs amazing reconstruction. he is National Flood Insurance Programadministered by the government, is the primary source of flood insurance in the United States and millions of homes in at-risk areas rely on it. But as disasters get worse, the program is under increasing financial pressure and few homeowners in flood-prone areas are buying protection.

Mark Friedlanderspokesperson for Insurance Information Instituteindustry trade group, said few landlords in places like Atlantic y Ashevillewho suffered terrible floods from Helene, they have flood insurance. And in Florida’s Big Bend, many storm victims don’t even have home insurance, he said.

“Based on Helene making landfall in a sparsely populated area of ​​Florida’s Big Bend, we expect this to be a very manageable event for Florida residential insurers,” Friedlander said. Although Helene’s wind damage could bring several claims to the state’s insurers, he said the industry can handle it. “Florida property insurers are in their best financial position in many years due to recent legislative reforms,” ​​he said.

Florida State Insurer, Information about the company Citizens Property Insurance Corp.covers more homes in the state than any private insurer, and may have enough cash on hand to cover claims, he said Denise RappmundMoody’s analyst. The state-backed reinsurance provider should be able to respond in the same way, he said.

The number of policyholders using Citizens has increased in recent years as insurers have become bankrupt and people cannot pay.

The question facing home insurers, experts said, is what happens if damage from Helene affects their reserves for future catastrophes, especially if another hurricane hits Florida this season.

Even before Helene, some experts suspected that Florida’s home insurance market was more fragile than previously thought.

The researchers Columbia Universityof the Harvard Business School and of the US Federal Reserve Board published a report last year warning that the state’s insurance market was more volatile than it appeared due to “lower quality” insurance customers. These companies were selling policies in the most risky areas, with less capital and 20% of them went bankrupt. However, they continued to work in the state because new rating agencies with more flexible standards gave them high financial stability ratings.

The study looked at what happened after the Hurricane Irmathat made landfall in South Florida in 2017. Claims skyrocketed after the storm and some insurers went bankrupt, forcing more residents to default on their mortgages. because they could not do repairs.

A similar pattern could repeat itself after Helene, he said. Parinitha Sastrya finance professor at Columbia Business School and one of the report’s authors. Although initial estimates indicate the storm did not cause as much damage as others, such as Ian, which was one of the costliest storms in the US at more than $118 billion, “it’s still a big blow,” he said.

“This is not going to reach the level of some of the storms we’ve seen before,” Sastry said. “But we have some insurers with thin capital. We don’t need another John to cause disruption.”

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