KBRA Says Florida Insurers Will Weather the Storms; Cat Fund Can Handle Payouts

Florida’s Hurricane Catastrophe Fund, a state-created layer of reinsurance, expects to pay out about $4.6 billion to help cover insurers’ losses in Hurricanes Helene and Milton. But that won’t trigger a surcharge on premiums.

And a number of Florida property insurers will take a hit from the recent storms, but that, too, will be manageable.

That’s the word from the Cat Fund’s advisory council and from KBRA, the ratings firm previously known as Kroll Bond Rating Agency, which rates about 13 Florida-based carriers.

“While two major hurricanes hit Floridian shores within a two-week period, preliminary gross and net loss estimates for homeowners’ carriers indicate that full-year … earnings will be significantly reduced but are expected to remain positive, with no appreciable erosion in capital and continued near-term ratings stability,” KBRA said in a report released Thursday.

Many insurance carriers in Florida, expecting a busy 2024 hurricane season, had beefed up their reinsurance coverage this year, helping to make the storms earnings events, not capital events.

“Some insurers anticipate Hurricane Helene to be a full-retention event while others anticipate limited insured losses,” KBRA analysts noted. “Most insurers expect Hurricane Milton will be a full-retention event.”

Florida-based insurers rated and tracked by KBRA include Universal Property & Casualty; First Protective Insurance/Frontline; Heritage Property & Casualty Insurance; American Traditions Insurance; Olympus Insurance; Manatee Insurance Exchange; Orange Insurance Exchange; Tower Hill insurance company and exchanges; and others.

Most of the rated carriers should be able to help offset hurricane losses due to a “very strong first half of the year,” thanks to legislative litigation reforms and higher premiums, the rating firm said.

Policyholder surplus for KBRA-tracked insurers increased by 17% from 2023 to 2024.

“Many of these companies were able to improve their surplus through underwriting profitability, a trend not seen in the recent past,” the report reads. “Barring additional severe storm activity, KBRA expects many Florida homeowners’ insurance companies will still report a profit for FY 2024.”

Insurers’ claims operations were apparently prepared for back-to-back storms and the higher volume of claims that resulted, the agency noted. But the events will likely make some insurers more cautious about taking out more policies this year from the state-created Citizens Property Insurance Corp., the largest property insurer in the state, KBRA said.

KBRA analysts could not be reached for comment for further information on the report. The report can be accessed here.

Meanwhile, the Florida Cat Fund estimates it will have to pay out almost $5 billion, but will have more than $7 billion in cash and another $3.25 billion in pre-event bond funds available to cover the cost, said Chris Spencer, executive director of the State Board of Administration that oversees the Cat Fund, according to news reports.

The Cat Fund’s advisory council met this week and reviewed the fund’s finances. The vast majority of the reinsurance payouts to insurers will be for Hurricane Milton, the Orlando Sentinel reported.

As of Thursday, Oct. 31, Florida insurers had reported more than 266,800 claims from Milton. Some 169,660 of those have been closed without payment, according to the Florida Office of Insurance Regulation. By Nov. 7, the total number of claims had grown to 281,260, with total estimated insured losses at more than $3 billion.

The office and some claims adjusters have reported that much of the damage from Milton is from storm surge and flooding, which is not covered by most property insurance policies. And the value of many wind claims have turned out to be below homeowners’ deductible levels.

Photo: Homes destroyed by Hurricane Milton in Grove City, Florida. (AP Photo/Rebecca Blackwell)