Florida escapes most of Idalia’s wrath as hurricane season nears peak


While the economic loss from Hurricane Idalia will be counted in the billions of dollars, it could have been a lot worse as it pales in comparison to the death and destruction brought about by Hurricane Ian last year.

Idalia made landfall last week as a Category 3 hurricane in the Big Bend area of Florida with winds of up to 125 miles per hour and a record storm surge in some parts of the Gulf Coast.

The total damage and economic loss from Idalia in the Southeast, which includes Georgia and the Carolinas, could total between $18 billion and $20 billion, according to AccuWeather.

Cars navigate a flooded street after Hurricane Idalia hit Crystal River, Florida, last week.

Bloomberg News

In comparison, the damage and economic loss from Hurricane Ian were put at between $100 billion and $120 billion, AccuWeather said.

Idalia left at least one person dead in Florida compared to the 150 killed in the state after Hurricane Ian hit last September.

“Luckily, most of the highest winds and the storm surge were in a relatively unpopulated area compared to last year,” Joel Myers, AccuWeather’s founder and executive chairman, told The Bond Buyer. “That makes a big difference.”

The Atlantic hurricane season runs from June 1 to Nov. 30, and has another 45 to 60 days left, he said.

“We’re still expecting more activity,” Myers said. “The hurricane season peaks on Sept. 10. If you plot 150 years of hurricane frequency and hurricane intensity, they both line up on average as increasing chances until on Sept. 10 and then decline after that into October and beyond Oct. 15 fairly rapidly.”

He said AccuWeather expects at least one or two more tropical storms or hurricanes to hit the United States before the season ends.

In the central Atlantic Ocean, Tropical Storm Lee is expected to develop into a major hurricane, according to the National Hurricane Center.

“Continued steady to rapid intensification is expected during the next few days,” the center reported Wednesday morning.

“This storm may pose a significant threat to the northeastern Caribbean, Bermuda, the U.S. East Coast, and Atlantic Canada later this week into next week,” AccuWeather said.

The potential impact on the United States depends on the storm’s ultimate path, it said. Residents along the U.S. East coast from Florida to Maine should closely monitor the situation; the potential impact timeframe is from. Sept 13 to Sept. 16. 

On Tuesday, Florida Gov. Ron DeSantis said about 96% of all those who lost power during the hurricane have been restored. Duke Energy, Florida Power and Light, TECO Energy and local co-ops and municipalities have worked together to rebuild substations, power poles and transmission lines.

“Restoring power to the homes and businesses of impacted Floridians is an important step in the recovery process and would not be possible without the hard work of our utility linemen,” DeSantis said.

Despite the hit from Idalia, state-owned Citizens Property Insurance Corp. remains in good shape as it did after Ian’s landfall last year.

“The availability of reinsurance for the current hurricane season as well as recent takeouts from Citizens are signs that recently enacted litigation reforms have had a positive impact on the insurance market in Florida,” Ben Watkins, Director of the state Division of Bond Finance, told The Bond Buyer.

Citizens implemented the legislative reforms aimed at stabilizing the Florida property insurance market and return it to the role of being the state’s insurer of last resort. Currently, it is the largest insurer in Florida with more than 1.3 million policies outstanding.

Earlier this year, the state Legislature passed a series of bills with the aim of cutting insurance litigation, improving claims payout timing and limiting Citizens’ insured base since consumers who face insurance non-renewals may turn to Citizens.

“The litigation reforms are a game changer and fundamentally alter the landscape in a positive way for insurance companies writing policies in the state,” Watkins said. “However, the full effects of the litigation reforms will take time to be fully realized.”

He added that “the financial impact of Idalia on Citizens and the state Florida Hurricane Catastrophe Fund are expected to be manageable with current resources on hand.”

All insurance companies that operate in Florida were able to purchase their reinsurance for the upcoming hurricane season by the June 1 deadline, Watkins said.

Some changes in weather patterns have been noted this year.

“We’re seeing increasing intensity and frequency of extreme weather events,” Xiao Lin, associate professor at the Greenberg School of Risk Management, Insurance and Actuarial Science at St. John’s University in New York, told The Bond Buyer. “And this is not just limited to Florida, but also to wildfires in California and most recently in Maui, Hawaii.”

She noted it was “actually quite difficult to definitively link all those extreme weather events to climate change — it’s more like a pattern that we are seeing.”

Still, she noted that for Florida this year, “there is some evidence that climate change is making an impact, specifically the ocean temperature is extremely high, at an historical level, so there is extremely warm water in the Atlantic which typically causes increasing hurricane activity.”

Looking at the residential property insurance market in Florida, Lin said it “has always been sort of a mess since Hurricane Andrew in 1992 when some of the big national insurers basically exited the Florida market, like Allstate.

“Now 30 years later, even before Hurricane Idalia made landfall, several major insurance companies chose to exit the Florida market including Farmers,” she said. “So the takeaway here is that extreme weather events are becoming more and more intense and more frequent. Private insurance companies can usually raise their premiums, but if they can’t raise them enough to cover the increased cost of providing insurance, then they can choose to exit the market.”

She noted that this could exacerbate the availability problem for residents by combining it with an affordability problem, causing a protection gap.

A sheriff’s deputy picks up an American flag from debris following Hurricane Idalia in Horseshoe Beach, Florida.

Bloomberg News

On Tuesday, Fitch Ratings issued a report that said rising premiums and the reduced availability of homeowners’ property insurance could become a drag on housing markets, development activity, overall economic growth and tax bases for certain local governments in Florida over time.

“Insurers are re-evaluating their exposures to geographic areas with elevated catastrophe risk as they face greater losses and higher building and reinsurance costs,” Fitch said. “Insurance plays a key role in securing mortgages and enabling rebuilding following natural disasters.”

Fitch said that in 2022 there were 119 natural catastrophes in the United States, which resulted in $98.8 billion in insured property losses, up from 103 catastrophes costing $93.3 billion in 2021, according to the Insurance Information Institute and Aon. This compares with annual losses averaging $62.1 billion adjusted for inflation over the prior eight years, according to the rating agency.

Average homeowners’ insurance premiums in Florida were up 11% in 2020 from the year before to $2,165, the highest in the country.

In Florida, some insurance companies have announced reduction or cessation of home and condo coverage, including Farmers and Allstate’s Castle Key subsidiary, while seven firms entered liquidation in the last 18 months.

The Florida Insurance Guaranty Association recently approved a 1% emergency assessment on all covered lines of business other than auto to cover claims owed by United Property & Casualty Insurance Co., one of the liquidated insurers.

In July, FIGA tapped the municipal bond market for the first time in more than 30 years, selling almost $600 million of tax-exempt fixed- and variable-rate bonds to help fund claims from insolvent insurance companies in the state.

Both Citizens and the Cat Fund can levy assessments, subject to a cap, on almost all property and casualty insurance policy to pay claims. Increased storm frequency and severity raises the likelihood of increased levies, according to Fitch.

“Recovery following natural disasters may be delayed or incomplete if there are greater numbers of those who are under-insured or uninsured due to affordability or non-renewal issues,” Fitch said.

“High-risk areas could be left with a smaller tax base if hurricane or wildfire damage leads to permanent relocations, or if these areas find it difficult to attract new residents,” Fitch said, adding it hasn’t seen this happening because insurance is only one of many factors when a person decides to buy a home.

“However, pressures on housing demand could be amplified with increasing natural disasters and insurance markets in which the insurers of last resort are costly or impose higher assessments to cover increased claims,” Fitch said.

In August, Fitch affirmed Florida’s issuer default rating and $6.4 billion of outstanding general obligation bonds at AAA; the rating outlook is stable. Florida’s GOs are rated Aaa by Moody’s Investors Service and AAA by S&P Global Ratings; both agencies also have stable outlooks on the bonds.

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