Hurricane Milton – how big will the loss be for insurers?

Hurricane Milton, which made landfall near Siesta Key, Florida on October 9 as a Category 3 storm, could result in nearly $100 billion in economic damage, including both insured and uninsured losses, according to Morningstar DBRS.

The storm, with sustained winds of 120 miles per hour, hit areas with high rebuilding costs, mostly affecting the Tampa metropolitan area, a major economic hub. The damage led to expectations that insured losses could reach the end of Morningstar DBRS's initial estimate of $30 billion to $60 billion, similar to Hurricane Ian losses in 2022.

Insured damages from Milton include losses from floods, which are usually covered by the National Flood Insurance Program (NFIP) rather than private insurance companies. The Sarasota and Tampa Bay areas experienced storm surges and heavy rains, with losses covered by the NFIP potentially contributing up to $10 billion in total insured losses.

According to Morningstar DBRS, while large national insurers may be protected from large financial losses, smaller and regional insurers may face greater pressure. In recent years, many national insurers have pulled back or pulled out of the Florida home insurance market due to profitability concerns. As a result, Citizens Property Insurance Corporation, the state's public insurer, has become the largest residential property insurer in Florida.

Although citizens are expected to bear the brunt of the losses, its financial stability remains the same due to its ability to charge existing policyholders. Conversely, smaller local insurers may face increasing pressure on earnings.

Moody's RMS Event Response, meanwhile, estimates that combined insured losses from Hurricane Milton and pre-Hurricane Helene would be between $35 billion and $55 billion.

“The first composite loss estimate is based on Moody's RMS Event Response robust methodology for estimating insured event losses,” said Mohsen Rahnama, chief risk modeling officer at Moody's. He noted that their estimates include observational data, aerial photographs, and resurveys, covering more than 2,000 miles of affected counties in Florida.

“Estimating losses in these events is a challenge, and it is important to consider all the associated complexities and uncertainties, especially in the contiguous regions affected by both hurricanes,” said Rahnama.

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