30 September 2022Insurance

Hurricane Ian ‘costliest’ Florida storm in 30 years with up to $47bn expected losses

Residential and commercial wind and storm surge losses from major Hurricane Ian could be upwards of $47 billion, making it the “costliest Florida storm” since Hurricane Andrew made landfall in 1992. Ian will have an “industry-changing impact” on the future of real estate and infrastructure, forcing some insurance companies into insolvency and making coverage less accessible in regions like Florida, analysts have warned.

CoreLogic’s post-landfall projections, updated based on the September 29 8:00 AM Pacific Time (PT) National Hurricane Center (NHC) advisory of the storm, suggest that estimated losses from hurricane Ian wind and storm surge are expected to be between $28 billion and $47 billion. The data analysis includes insured loss from damage to residential homes and commercial properties in Florida, including contents and business interruption. It does not include broader economic loss from the storm.

Wind losses for residential and commercial properties are expected to be between $22 billion and $32 billion, while insured storm surge losses in Florida are expected to be an additional $6 billion to $15 billion.

Ian was downgraded to a tropical storm as it moved across the Florida peninsula. However, flash flooding will be the primary concern until the storm reforms over the ocean with the potential to make another landfall as a hurricane in South Carolina.

If forecasts hold steady, CoreLogic expects Hurricane Ian to continue bringing flash flood devastation across Florida and potentially into South Carolina and Georgia. It noted that residents will experience standing water and sewer backups for days, slowing immediate recovery. Significant infrastructure damage will also impede local governments’ ability to respond.

“This is the costliest Florida storm since Hurricane Andrew made landfall in 1992 and a record number of homes and properties were lost due to Hurricane Ian’s intense and destructive characteristics,” said Tom Larsen, associate vice president, hazard & risk management, CoreLogic.

“Hurricane Ian will forever change the real estate industry and city infrastructure,” Larsen warned. “Insurers will go into bankruptcy, homeowners will be forced into delinquency and insurance will become less accessible in regions like Florida.”

CoreLogic anticipates recovery to be “slow and difficult”, given that inflation is at a 40-year high, interest rates nearing 7%, and labour as well as materials are still high in demand.

“We’re at a crossroads with Hurricane Ian in terms of adapting to today’s catastrophe risk environment,” said Larsen. “Infrastructure and building codes will evolve so that we can be more resilient ahead of what are bound to be more history-making storms in the near future. We cannot just rebuild; we need to restore for resilience.”

Florida’s real estate market was healthier than average prior to Hurricane Ian, according to CoreLogic economists. “In the second quarter of 2022, Florida posted one of the highest home equity gains in the U.S., with an average of $100,000 in equity per homeowner,” said Selma Hepp, interim lead of the office of the chief economist, CoreLogic.

“Florida also had the highest home price gains in July. Gains in equity and record declines in loan-to-value ratios will provide many Florida homeowners with a financial buffer in case economic conditions worsen, as is typically the case following natural catastrophes.”

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29 September 2022   Ian’s final reinsurance price tag veiled by major shifts in 2022 reinsurance appetite.
30 September 2022   The hurricane could potentially cause the exit of Florida specialist companies, analysts warn.
3 October 2022   S&P expects insured losses closer to the high end of $30bn to $40bn range.