Hurricane Idalia's Property Damage Estimates

According to preliminary estimates released by Moody's on Thursday, Hurricane Idalia is expected to result in $10 billion to $16 billion in property damage. Insurers will bear a portion of the loss, although the official estimate of insured loss won't be available until later.

Comparing Idalia to Hurricane Ian

Although these numbers are subject to change in the next few days, the damage caused by Idalia will be significantly less than the $113 billion caused by Hurricane Ian last year. Insurance covered approximately $50 billion to $65 billion of that damage.

Impact of Idalia

Despite impacting a large, multistate area from Florida to Georgia to North Carolina, the damage caused by Idalia is not considered "catastrophic" by Moody's analysts.

The region south of Tallahassee and north of Tampa, known as the Big Bend area, where the storm made landfall, is one of the least developed and sparsely populated regions in the state. Dixie, Levy, and Taylor counties, which were heavily affected, have fewer people and structures compared to other coastal counties in Florida.

The analysts noted that the hurricane's worst impacts were felt in an area with lower population density and fewer structures.

Economic Impact

The relative lack of economic activity in the Big Bend area also means that property values are lower compared to the rest of the state. The median single-family house price in Dixie, Levy, and Taylor counties was below $205,000 in the first quarter of 2023, according to the Moody's report.

In contrast, Hurricane Ian caused significant damage in more populated and wealthier areas of southwest Florida last year, such as Cape Coral and Fort Myers. The median single-family house price in Lee county, where these cities are located, was above $350,000.

Preventing Inland Flooding

One factor that helped prevent catastrophic inland flooding was the fast-moving nature of Hurricane Idalia and its path after landfall. Unlike slower-moving storms that linger in an area for an extended period, Idalia quickly moved out to sea within approximately 24 hours of making landfall, as noted by the analysts.

Insurers Dodging Responsibility in the Aftermath of Hurricane Idalia

Hurricane Idalia recently wreaked havoc as a powerful Category 3 storm, eventually weakening to a Category 1 hurricane within hours of making landfall. Although this downgrading significantly reduced wind damage, it led to a new problem: widespread flooding. Experts estimate that the majority of the loss resulting from this natural disaster can be attributed to flooding rather than wind damage.

For homeowners, insurance coverage for wind damage is typically included in their policies. However, flood coverage requires separate policies. Unfortunately, many residents in the Big Bend area, which hasn't seen a hurricane since 1968, might not have flood insurance. As a result, these homeowners will bear the financial burden of the flood damage, while insurers might escape much of the responsibility. While insurers may welcome this outcome, it is undoubtedly bad news for the families affected by the disaster.

Over the past few years, leading insurers and reinsurers have been steadily reducing their exposure to Florida. According to UBS analyst Brian Meredith, even though some companies experienced an uptick this year due to favorable pricing in the market, many have been trying to minimize their risk in the region. Notably, Warren Buffett's Berkshire Hathaway has seen increased activity in this sector.

Florida's homeowner insurance market is largely dominated by smaller regional carriers. Citizens, the state-backed insurer of last resort, has seen its market share grow rapidly as many private companies have withdrawn from the market. Currently, Citizens holds the largest share at 15.6%.

Among publicly traded companies, only Progressive and Allstate rank among the top 10 homeowner insurance underwriters in Florida. According to Meredith, they hold market shares of 4% and 3.2%, respectively.

In terms of commercial property insurance, Markel, Heritage Insurance, and Chubb lead the way with market shares of 9.1%, 7.8%, and 6.7% respectively. However, it is difficult to determine the extent to which these companies' commercial premiums are related to policies with flood endorsements.

While Hurricane Idalia may not be remembered as a particularly costly event, Florida's overall economic outlook remains positive in the near term. Nevertheless, this hurricane serves as a stark reminder of the state's vulnerability to disasters and the constant risk of threats undermining its structural advantages.