As has been the case over the last few years, a significant amount of coverage during the 2024 Atlantic Hurricane season has centred on the state of Florida.
Of the 5 hurricanes to make US landfall so far this year, 3 have hit the Sunshine State, including the devastating major hurricanes Helene and Milton, which both made landfall in the space of just two weeks. Through our response to these events and other major hurricanes to strike Florida such as Ian and Idalia, we see first-hand the level of destruction that can be caused and the consequences this can have for both insurers and policyholders alike.
This is fundamentally why Florida has become such a difficult place for insurers to justify doing business in, which has led to an ever-widening protection gap for homeowners across the state.
Although Florida was provided some rare relief through an 11-year period of 0 hurricanes between 2005-2016, since 2016 there have been 9 hurricanes to hit the state, including several major hurricanes, more than anywhere else in that time.
With unique geographical vulnerabilities and the increasing frequency and severity of hurricanes due to climate change, Florida’s 1350+ miles of heavily developed coastline and some 20 million population are more at risk than ever from the devastating effects that wind and flooding can bring.
Historically however, insuring the state has been a major challenge, with many examples of companies collecting premiums from policyholders for years, then a major hurricane causes them to go into insolvency, leaving people unprotected and out of pocket.
Now though, this issue has gotten so out of hand that there is even local news segments dedicated to tackling ‘Coverage Collapse’ across the state, showing just how untenable the situation is becoming for residents and insurers, where leaving the state appears to be the most logical solution for both parties.
To secure both the state’s short and long-term future, these problems really need to be addressed, and quickly, as Florida is an essential part of the US, representing the country’s fourth-largest economy, accounting for 5.82% of the $28 trillion US GDP, which equates to a GSP of roughly $1.7 trillion.
Examples of the wind and flood-driven damage caused by Hurricane Helene featured in the MIS GEO report.
Exploring Florida’s unique insurance challenges
Given Florida’s highly-publicised exposure risk, it isn’t surprising that the average annual insurance policy for a $300,000 dwelling is 2.5x the national average, sitting at around $5,500. What’s striking is that this price isn't inclusive of flood insurance, which tends to cost at least an additional $1,000 a year, meaning that policyholders will be spending the best part of $550 a month just to protect their homes.
Understandably, for a lot of people, this is unsustainable, especially when faced with record inflation driving increased cost of living expenses. As a result, this leaves them with two options, either having an uninsured property in the country’s most hurricane-prone state, or seeking the support of publicly funded insurance organisations, such as FEMA’s National Flood Insurance Program (NFIP) and Florida’s state-ran Citizens Property Insurance Corporation.
Whilst these have traditionally been a perfectly viable option for homeowners in Florida, they are now facing a significant crunch due to the increasing frequency and severity of catastrophic events in the state. Over the last few years, the NFIP has been shrinking, where in 2023, their reinsurance program was halved, primarily because of the major losses inflicted by Hurricane Ian in 2022, which led to 47,000 claims and $4.5bn in payments to policyholders.
FEMA shared on 11/11/2024 that they have already received 72,000 NFIP claims from Florida around hurricanes Debby, Helene and Milton, totalling approximately $894 million in payments. Though this is a huge amount of money, many could argue it is lucky that this number isn’t exponentially higher, given Helene’s storm surge shattered records and there were major concerns about Milton until it weakened before landfall.
Of the 7.5 million residential in-force insurance policies in Florida, Citizens now makes up 1.3 million of those, seeing a 3x increase over the last 5 years. The fact that more homeowners in the state are heading to Citizens is clearly influenced by the fact that since 2017, 10 Florida-based P&C insurers have liquidated, with 5 of those coming in 2022 alone, again largely driven by the fallout from Hurricane Ian.
From January 2025, Citizens are raising their premiums by 14%, meaning that even homeowners’ insurance option of last resort is still adding to budgetary strains. Ultimately, this makes sense, as Citizens is perpetually in a position of major insolvency risk, given the number of in-force policies they have and the inevitability of hurricanes around the corner every year.
What’s worrying is that should they reach the point of insolvency, the current failsafes in place mean that other insurance policyholders across the state would see their premiums rise to recoup the losses and ensure payouts are made to affected Citizens’ policyholders. So, just by proxy of having insured property in Florida, this carries a major financial risk, which almost entirely defeats the purpose of taking out insurance in the first place, creating a perilous, paradoxical situation that is equally frustrating for both policyholders and providers.
During Hurricane Helene (left), the MIS team identified 2.5 million in-force locations in the Exposure Layers for Wind and Flood damage and 800,000 within the Wind and Flood Claims Layers. For Hurricane Milton (right), there were as many as 6 million in-force locations in the Exposure Layers, then 300,000 in the Claims Layers. The 1.1 million locations in the Claims Layers for these back-to-back events represents 15% of the entire number of in-force locations in the state being impacted.
Searching for solutions
Though there’s nothing to be done to control the weather, there is plenty of opportunity to enact positive changes from a state-level, to make insuring Florida a more feasible prospect and help narrow the sizeable protection gap.
Given the constant property development in Florida, especially on the wetlands that previously provided natural protection from flooding, there’s calls for the state to update its flood maps, which many feel are decades out of date. If the state ensures that construction guidelines focus on building around natural flood plains to reap their benefits rather than replace them, communities will be safer, and insurers will feel confident that they can provide protection in those areas.
Whilst standardising and providing proper protection from hurricanes and other perils across Florida would undoubtedly require extensive resources, there’s huge potential for both short and long-term ROI, given the frequency of hurricanes in the state. If the impact of a hurricane that would typically cause billions of dollars of damage can be reduced and the losses are comparatively minimal, this will greatly benefit both the local economy and insurers in the state. Year-on-year, this could cover any initial investment many times over.
Thankfully, for the policyholders and insurance providers in Florida, encouraging signs are beginning to appear that should help the Sunshine State become an easier place to live and insure.
In May 2024, the Florida Senate officially integrated House Bill 293 into state law. This key piece of legislation requires homeowners’ associations to adopt hurricane protection specifications, make sure that they conform to building codes and prevents associations’ boards or committees from denying homeowners’ applications to install hurricane protection. This bill cuts through much of the red tape that previously posed challenges to those looking to fortify their homes, whilst creating business opportunities for insurers as more homes begin to carry less risk.
Although Citizens’ number of in-force policies has grown over the last 5 years, their recent Depopulation Program reduced this number by 400,000, transferring these policies to local insurers in order to encourage more insurance companies to operate in the state.
In 2024, there have been 9 new domestic insurers appear in the state, plus several national carriers have committed to doing business in Florida. This comes off the back of significant legislative reforms in 2023 which strengthened the Florida insurance market against the rife fraud problem, pledged $250m to hurricane protection retrofitting and increased consumer protection from insurance providers.
Perhaps the most promising sign is that 19 carriers in Florida this year have filed for either rate reductions or zero rate increases, which seems a big show of faith that things are getting better.
Combining data and intelligence to support insurers and policyholders
Through our response to over 200 global catastrophic events, it’s clear just how vital it is to be protected from the devastation that can be caused. Insurance is a must, especially in vulnerable areas like Florida, so the lower the protection gap, the more people can be prepared for the worst.
With pre-event reports, exposure assessments within 24 hours of an event, claims assessments within 72 hours as well as policy and portfolio-level insights, MIS is committed to being there for insurers in Florida when a hurricane hits, ensuring they can use the GEO platform to support affected policyholders when they’re most in need.
For more information on how MIS supports insurers in the Sunshine State and all over the world, get in touch with the team.
