Helene And Milton Could Drive Up Already Soaring Insurance Premiums

In addition to all the other suffering they’ve caused, hurricanes Helene and Milton could raise already-soaring premiums for homeowners insurance, especially in Florida, the most expensive state in the country to insure a house.

CoreLogic estimates Hurricane Helene caused as much as $47.5 billion in damage when it tore a path of destruction through the Southeast in late September. Damages from Milton, which hit Florida in early October, could add up to $34 billion, according to CoreLogic.

The storms hit at a time when homeowners insurance premiums were already rising rapidly. Companies have pushed up premiums because of inflation and the rising risks of severe storms worsened by climate change. Nationwide, homeowners insurance premiums were on track to rise 6% in 2024 after jumping 20% over the past two years, according to a survey by Insurify, an insurance company.

Florida Will Be Particularly Impacted

The situation was even worse in Florida. Florida’s insurance market was already in shambles in the wake of Hurricane Ian in 2022, which caused $112 billion worth of damage. But the storms this year could exacerbate the issue. Insurify estimated that homeowners in the Sunshine State would pay an average of $11,759 a year in homeowner’s insurance premiums in 2024, making Florida the most expensive state for insurance.

The worsening risks of storm damage in Florida contributed to an exodus of private insurance companies and drove some local companies out of business. Citizens Property Insurance Corporation, the state-owned “insurer of last resort,” became the state’s largest insurer.

Recent changes to Florida law curbing lawsuits against insurance companies helped bring some private insurers back. However, the recent hurricanes could shake up an already-battered insurance market, analysts at Fitch Ratings said in a research note last week.

“The Florida homeowners’ insurance market’s precarious position will weaken further with the destruction generated by Milton,” Brian Schneider, senior director of insurance at Fitch, wrote. 

Insurers Will Pass Costs on In Several Ways

The costs of the latest storms could be passed on to rate-payers in several ways, said Andy Hoffman, a professor of sustainable business at the University of Michigan. For one thing, people who file claims on their hurricane damage could see their premiums go up, as usually has happened in the past, he said. The effects could be broader, too.

“Will their rates go up just across the board after this? Certainly, they’re going to have a big payout, so their surplus is going to be reduced,” Hoffman said. “And if you’re an insurance company that’s strictly in Florida or if you’re concentrated in the Florida market, is this something that you’re going to have to factor in going forward in order to make sure you have enough liquidity to cover payoffs.”

Reinsurance companies—the companies that insure insurance companies—could raise their rates next year in response to the storms, and there’s only one way for insurance companies to make up for those added costs.

“They have to pass that along to the consumer,” Hoffman said. “They have no choice, so that could also drive up costs.”