The emergence of reinsurance has helped Florida property insurers absorb losses from hurricanes.
Insurance companies have begun to assess the damage from Hurricane Michael. Despite the storm’s magnitude, the biggest hurricane to hit Florida’s Panhandle in 150 years, the sparsely populated areas and the robust reinsurance industry leave insurers feeling optimistic they can absorb losses. Risk modeler AIR Worldwide predict insured losses from Michael to run between $6 to $10 billion.
The industry lucked out as Michael, a category 4 storm, hit sparsely populated area in Florida’s Panhandle. Had the same storm hit a major Florida city like Tampa or Miami, insururs would be looking at a much different situation.
The Florida insurance industry has a long and turbulent history with destructive storms. Many insurance companies went bankrupt after Hurricane Andrew in 1992. The insurance industry in Florida has adjusted to what has become the new normal--devastating storms walloping the state every season. Hurricane Hermine, Matthew in 2016 and Irma in 2017 left Florida reeling with record insurance losses, including an astounding $50 billion in damages from Irma alone.
However, Florida insurance companies have diversified. Few insurance companies are “Florida Only”, or companies that have 75 percent or more of their homeowners and commercial property premiums written in Florida.
Most smaller insurers that are in Florida are backed by reinsurance or other capital providers that mitigate their risk. Reinsurance programs survived Irma fairly intact, and experts predict the reinsurance industry should be able to absorb losses from Michael.
Florida Governor Rick Scott placed a 90 day freeze on the increase in insurance premiums, as well as directing the insurance commissioner to rescind all cancellations and non renewals that took place in the days leading up to Michael.