Hurricane Ian’s impact on the insurance industry

October 11, 2022

Hurricane Ian is already one of the most devastating natural disasters in recent history. The Category 4 storm and its 155-mph winds has wreaked havoc across communities, bringing widespread flooding and catastrophic property damage with it. While the true extent of the destruction has yet to be tabulated, research firms are estimating total loss predictions between $28-$47 billion. That would make Ian the costliest Florida storm since Hurricane Andrew in 1992.

When tragedies like this strike, and people’s lives and property are left shattered, the natural response is the need to be made whole again, which is when the insurance industry plays its part. After all, insurance is for worst-case scenarios. And, this is certainly that.

After the devastation

So, what happens to the insurance industry when Hurricane Ian causes devastation? The short answer is, it scrambles as it tries to make things right. And in Florida, where the industry is already strained, it overloads and stretches even more.

As residents and victims of the storm secure their safety, the next step will be the immediate assessment of the damage done from the storm. Insurance companies will be inundated with claims filed from their policyholders, which will assuredly come in record numbers—and complex variations.

Hurricanes of this magnitude bring different varieties of damage to all sorts of properties under all gradients of coverage. While the national number of flood insurance policies are low, those within the government-designated floodplains of Florida, the areas most exposed to flooding, are of the highest in the nation, at over 47% of homes in those counties.

With these huge numbers of claims soon to be rolling in, insurers will have to sift through and determine payouts and scale. The risk is bottlenecking and overload with large volume claim management like this—which is why state of the art policy administration platforms are so important today—and withstanding record losses and rising exposure estimates, which insurers in the area must plan ahead for.

The response

However, there is no real planning ahead for devastation on the scale of Hurricane Ian. Florida’s insurance market has seen significant troubles in the years preceding this event. Property insurance companies have been known to leave the state recently, and annual insurance rates are three times the national average in Florida. The Federal Emergency Management Agency will be providing grants for some housing and home repairs as well as low-cost loans where needed, and President Joe Biden approved a disaster declaration in Florida, which allows the state to use federal funding to aid in the recovery process. Florida Insurance Commissioner David Altmaier also issued an emergency order that will help.

Effects post-Ian

However, the rest will fall on insurers. That means large amounts of claims to sift through and large payouts to coincide. That could point to multiyear surcharges to homeowner insurance or auto policies down the line to balance those losses, and an even more protracted insurance crisis in a post-Ian Florida, a state already calling for reform in the industry. If other similar size and magnitude hurricanes like 2008’s Ike are any indication, the primary recovery period could be as long as 14 months, with remodeling peaking three months after landfall. It took until the second anniversary of Katrina to settle 99% of the personal property claims and 150,000 commercial claims, to say nothing of the infrastructure damage that took much longer. In any case, it’s clear the recovery process will be slow and difficult, and it will fall on insurers to weather the storm for their customers. That in itself will have long lasting effects.

Gregg Barrett
National Flood Services

Gregg Barrett launched National Flood Services, working with the Federal Insurance Administration and the National Flood Insurance Program. He later joined Bankers Insurance Group as executive vice president of sales before founding WaterStreet in 2000. Currently, he is the company's CEO.

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