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Hurricane Helene caused insured losses estimated at $6.4-15 bn

Hurricane Helene caused insured losses estimated at $6.4-15 bn

Hurricane Helene has caused insured losses estimated at around $6.4 bn, according to catastrophe risk modeling specialist Karen Clark & Company. Insurers could face losses of as much as $15 bn if Hurricane Helene makes landfall close to Tallahassee, according to R Street. The losses are driven by wind, storm surge, and inland flooding across 9 states.

The storm, a Category 4 hurricane with 140 mph winds, made landfall near Perry in Florida’s Big Bend Region on September 26. It then weakened, transitioning to a tropical storm and eventually a post-tropical storm by the evening of September 27.

The $6.4 bn estimate from KCC includes damages to residential, commercial, and industrial properties, as well as automobiles and business interruption.

However, it does not account for damages to boats, offshore properties, or losses covered by the National Flood Insurance Program (NFIP). These damages could be significant due to the coastal impact.

A key findings from Hurricane Helene

  • Hurricane Helene is expected to cause $6.4 bn in insured losses, mainly due to wind, storm surge, and inland flooding.
  • Helene, a Category 4 hurricane, made landfall in Florida’s Big Bend region and weakened as it moved northward, causing significant damage far from the landfall point.
  • Less than 15% of homeowners carry flood insurance, highlighting a large flood protection gap, particularly away from coastal areas.
  • The $6.4 bn estimate excludes damages to boats, offshore properties, and losses covered by the National Flood Insurance Program (NFIP).
  • Other estimates range widely, with CoreLogic placing losses between $3 bn and $5 bn, while Moody’s projects total property damage at $15 bn to $26 bn.

Helene, the fifth hurricane of the 2024 Atlantic season and the second major storm, exceeded the intensity of Hurricane Idalia from 2023. Record rainfall of over 20 inches was observed in parts of western North Carolina.

KCC noted that most of the damage occurred far from the landfall point, with more wind damage in Georgia and surge damage in Tampa than in Florida’s landfall region. North Carolina experienced the most significant inland flooding.

Property losses are expected to be higher in Tallahassee due to the storm’s trajectory. Georgia’s wind-related damage may surpass Florida’s, while coastal flooding hit the Tampa Bay area, especially Clearwater and St. Petersburg. Inland flooding, though severe, will contribute less to insured losses as many properties lack flood insurance.

Hurricane Helene caused insured losses estimated at $6.4 bn - KCC

Other organizations have provided varying estimates. CoreLogic estimates wind and storm surge losses between $3 bn and $5 bn. Moody’s projects total property damage to range from $15 bn to $26 bn.

Steve Bowen at Gallagher Re anticipates private insurance losses in the mid-to-high single-digit billions. RBC Capital Markets estimates losses could range from the mid-single-digit bn to double-digit bn range.

Fitch Ratings does not expect Hurricane Helene to impact credit ratings for property and casualty insurers or major Florida insurers, but it could trigger NFIP’s reinsurance program. Fitch’s estimates of insured losses range between $5 bn and $10 bn, based on insurers’ capital strength and the ability to raise premium rates.

Standard homeowners’ insurance typically excludes flood damage, and while the private flood insurance market has grown, it still accounts for less than 1% of industry direct premiums.

Fewer than 15% of homeowners carry flood insurance, highlighting a significant protection gap. This gap is most evident away from coastal regions, where historical flood activity is less frequent.

However, mortgage lenders require flood insurance for homes in FEMA-designated high-risk zones or properties that have previously received FEMA compensation.

Fitch noted that 37% of NFIP policies are underwritten in Florida, the highest in any state, with over 1.7 mn policies in place. The NFIP’s comprehensive reinsurance program may be activated due to the flooding and storm surges caused by Helene.

Insurers could face losses of as much as $15 bn if Hurricane Helene makes landfall close to Tallahassee, according to Jerry Theodorou, R Street director of finance, insurance and trade policy.

“As a result, storm surge, wind, and rainfall impacts will extend far away from the center and well outside the forecast cone, particularly on the east side. In addition, the fast forward speed when Helene moves inland will result in a far inland penetration of strong winds over parts of the southeastern United States, including strong gusts over higher terrain of the southern Appalachians,” said Aon.

Guy Carpenter noted there have “only been four named storms in the 21st century over the Gulf of Mexico that have reached the same size of tropical storm force winds as Helene: Irma (2017), Ike (2008), Ivan (2004), and Isidore (2002).”

Landfall could bring significant impacts to Tallahassee if the eyewall moves directly over the city. As Helene moves further inland, the decay of winds is expected to be lower than average due to the quick forward speed and frontal interaction.

Helene is expected to bring sustained tropical storm winds and hurricane force gusts as far inland as Atlanta; this is the sixth year of the last decade Atlanta has been under tropical storm warnings. Helene’s impacts will potentially be more acute than previous tropical storms due to its quick forward speed helping the storm maintain a higher intensity.

In the wake of Hurricane Helene’s widespread damage, U.S. Rep. Jared Moskowitz of Florida is renewing calls for a national fund to defray the cost of natural disasters, which he said would stabilize insurance markets in states like his.

Moskowitz, a Democrat, last year introduced H.R. 3525, known as the Natural Disaster Risk Reinsurance Act of 2023, which would create the fund within the Treasury Department and allow states to voluntarily participate in the program.

The program would provide payments to participating states for damages from a natural disaster not covered by the National Flood Insurance Program for amounts in excess of a set trigger. The thresholds are to be calculated by the National Academy of Sciences, under the bill.

States would need to present a plan that ensures the coverage of losses by insurers doesn’t exceed the trigger amount. States must also pledge to repay the full amount provided by the program within 10 years, according to the bill.

“This is a problem — we’ve this seen this problem in Florida and it’s coming to other states,” Moskowitz said during a Sept. 28 appearance on Fox News. “I filed a bill that would create a national catastrophic insurance fund. It would add no money to the deficit. It would allow states to buy bonds that when we have these one-in-1000-year events would take that off of the plates of insurance companies, which is driving up 25% of the cost on reinsurance.”

By spreading the risk, Moskowitz said the fund could control surging insurance costs in places such as Florida that threaten to force some seniors and others to leave areas that are becoming unaffordable.

“Even if my bill doesn’t move or go anywhere, I think the United States government and Congress has to start realizing that we have to amortize the risk,” he said. “We have to spread this risk around. It can’t just be on one state or two states to deal with this — just like FEMA does. FEMA spreads that risk around. When there’s a big disaster, FEMA comes in and helps local cities, counties and the states recover. I think we’re going to have to do the same thing in the insurance market.”

FAQ

What is the estimated insured loss from Hurricane Helene?

Hurricane Helene is expected to cause around $6.4 bn in insured losses, primarily due to wind, storm surge, and inland flooding across nine states, according to Karen Clark & Company (KCC).

How does Hurricane Helene compare to previous hurricanes in terms of impact?

Helene, a Category 4 hurricane with 140 mph winds, is the second major hurricane of the 2024 Atlantic season. It surpassed the strength of Hurricane Idalia, which made landfall with 125 mph winds in 2023.

Does the $6.4 bn insured loss estimate include all types of damages?

No, the estimate does not include damages to boats, offshore properties, or losses covered by the National Flood Insurance Program (NFIP), which may add significantly to the total damage figure

Will Hurricane Helene impact the credit ratings of insurers?

Fitch Ratings does not expect Hurricane Helene to affect the credit ratings of property and casualty insurers, Citizens Property Insurance, or the Florida Hurricane Catastrophe Fund (FHCF), due to their strong capital positions and ability to adjust premium rates.

How significant is the flood insurance gap in the areas affected by Hurricane Helene?

The private flood insurance market remains small, covering less than 1% of industry premiums. Fewer than 15% of homeowners carry flood insurance, indicating a large protection gap, particularly in areas away from the coasts.