Insurance analysis firm Fitch Ratings said on Thursday that losses from Hurricane Milton will further weaken the “precarious position” of Florida’s property insurance market and possibly lead to “hardening” of premiums for policyholders next year.

Hardening is an insurance term that means premiums could rise.

Milton spawned high winds, substantial storm surge, heavy rain, tornadoes and flooding as it barreled into the state on Wednesday night. But the storm was not the black swan event that many had predicted when it rapidly intensified into Category 5 status while in the Gulf of Mexico.

Fitch’s report estimated that Milton caused $30 billion to $50 billion in insured losses, making it the most expensive for insurers since 2022’s Hurricane Ian, which caused $60 billion in losses. Combined with 2024’s previous storms, Milton will push industry-insured losses to more than $100 billion for the fifth straight year, the report said.

That estimate excludes losses from flooding caused by storm surge that property insurers are exempted from paying, said Brian Schneider, Fitch Ratings’ senior director of insurance.

“The Florida homeowners’ insurance market’s precarious position will weaken further with the destruction generated by Milton,” the report said.

It also said, “Ultimate losses will also depend on demand surge, as Milton follows closely on the heels of Hurricane Helene, a Category 4 that devastated the southeast U.S. two weeks earlier. Higher demand and limited supply of labor and materials needed to adjust claims and repair/rebuild following multiple large-scale disasters can increase insured losses by 20% or more.”

Fitch said that a number of Florida insurers will be forced to tap into their reinsurance — which is insurance that Florida insurers must buy each year to ensure they can cover all claims after one or more catastrophes.

While most Florida-based insurers aren’t expected to exhaust their reinsurance assets, the company said that further storms could leave some insurers “exposed.”

“Florida homeowners’ specialist reinsurance programs are likely able to absorb losses from events up to approximately 1-in-100-years. Losses above such levels could go ‘over the top’ of catastrophe reinsurance programs, leading to a potentially rapid erosion of capital,” Fitch said.

Combined with losses from earlier storms this year, Hurricane Milton’s costs will likely limit any potential that Florida insurers will pay less for reinsurance next year, which could lead to a “hardening” of premium rates for policyholders in 2025, FItch’s report said.

Asked about the report, Mark Friedlander, director of communications for the insurance industry-sponsored Insurance Information Institute, pointed out that Karen Clark & Company, a catastrophe modeler, hasn’t yet released its estimate of Milton’s insured losses.

He added that Florida-based insurers have “adequate levels of reinsurance” to cover events like Milton.

Fitch’s report pointed out that Fitch Ratings doesn’t actually rate Florida-based property insurers.

Joe Petrelli, president of Demotech Inc., which rates the financial strength of most companies in the Florida insurance market, responded to Fitch’s report by saying, “Demotech is delighted that Floridians appear to have dodged what could have been a Category 5 Milton bullet. Catastrophe reinsurance is a critical component of every state’s market, especially those states facing wind, water and fire.”

Friedlander questioned Fitch’s insured loss estimates, saying, “While we expect Milton to be a larger wind loss event compared to hurricanes Debby and Helene, we do not anticipate it to be near the level of insured losses caused by Hurricane Ian.”

Losses won’t reach levels predicted by some forecasters earlier in the week because Milton’s intensity dropped to Category 3 before landfall and Metro Tampa avoided a direct hit, he added.

Barron’s reported on Thursday that stock prices of four publicly traded Florida-based insurers — Heritage Property and Casualty, Universal Insurance, American Coastal and HCI Group — rallied on Thursday morning following news that Milton’s damage was not as bad as expected.

Friedlander said that Florida’s insurance market is “in its best financial position in many years due to state legislative reforms in 2022 and 2023” that addressed legal system abuse and claim fraud.

Shortly after residents woke up on Thursday morning and turned on their televisions to review damage left by Milton, Florida Insurance Commissioner Michael Yaworsky issued a statement asserting that the reforms have strengthened the state’s property insurance market, “which is contrary to the narrative that has been circulating about our industry in recent months.”

But Fitch asserted that Milton will test the reforms, saying in the report that their financial benefits “will need to be proven through various catastrophe events before they can be deemed successful and supportive of longer-term private market capacity.”

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