Hurricane Milton is barreling toward Florida, and the category 4 storm could be catastrophic for millions of people and insurers who are still recovering from Hurricane Helene.
“Milton should be a double-digit billion insured loss,” Wells Fargo said in a research note, estimating those losses could be anywhere between $10 billion and $100 billion. Its base case, however, is $20 billion worth of losses. Either way, the market seems to be pricing in more than $50 billion in losses, the bank said.
But what does that mean for insurers and reinsurers and their bottom line? In a more than $50 billion loss scenario, in terms of Wells Fargo’s coverage, it could equate to 3.5% of equity and 106% of fourth-quarter earnings, or 20% of earnings for the entire year. Obviously the bank’s base-case scenario would be better, amounting to roughly 1.5% of equity and 43% of fourth-quarter earnings, or 8% of full-year earnings, per the note. Not to mention, reinsurance rates could rise on the back of Hurricane Milton and Hurricane Helene, Wells Fargo said, which would essentially mean higher premiums for homeowners.
Hurricane Helene, which formed in the late days of September and hit parts of Florida as a category 4 storm, resulted in between $30.5 billion and $47.5 billion of total insured and uninsured, flood and wind losses, according to CoreLogic. Additionally, Moody’s estimates total U.S. private market insured losses from Hurricane Helene to be between $8 billion and $14 billion, with a best estimate of $11 billion. Last year there were 28 weather and climate disasters, amounting to about $93 billion in damages.
There are about two more months of hurricane season, and multiple hurricanes have already made landfall. Since the 1980s, the country has averaged around eight major weather events per year that caused at least $1 billion in damage. In the past five years the average number of major weather events causing at least a billion dollars in damage has climbed, reaching 18 as of last October. At the time, John Rogers, chief innovation officer at CoreLogic, told me it was only going to get worse. “The severity and frequency of major weather events, unfortunately, is likely to go up,” Rogers said.
It’s why we’re seeing insurers fleeing Florida. The market is too challenging for them; they can’t manage the risk exposure; they’ve said it all. And homeowners and small landlords in Florida and beyond, well, they either can’t find or afford coverage, and if they can, they’re dealing with much higher premiums. Across the country, the average property insurance payment for single-family homes is 52% higher than it was four years ago; the actual payment can be higher depending on where you live.
It’s given rise to uninsurable properties. An estimated $1.6 trillion in property value of uninsured homes was at risk three years ago and 6.1 million homeowners were uninsured, a report published this year found. The situation has likely worsened as insurance woes are becoming more prominent. Just think, you can now look up homes in Zillow, and it will present you with climate risks.
