According to a report from Moody’s, Hurricane Ian will inflict a heavy toll on Florida-only insurers, which have already been struggling with poor profitability, high claims litigation costs, weak capitalisation, inflation, and increased reinsurance costs in recent years.
Florida-only players will bear outsized losses from Ian given their business concentration in the state, says Moody’s.
The report adds that the majority of insured losses from Hurricane Ian will stem from the homeowners, commercial property and auto physical damage lines of business.
The report notes, “Florida’s highly litigious environment will make it difficult for insurers to settle claims for Hurricane Ian.”
“The state’s policy to allow homeowners to assign their property insurance benefits to third parties has led to abusive claims filing practices and a surge in costly litigation that has driven Florida property insurers’ direct defence ratios up significantly, and contributed to higher values for the settlement of claims.”
As homeowners coverage does not cover flood losses, policyholders that are denied insurance claims from Ian from their homeowners policies may decide to litigate the claim against the insurer, suggests Moody’s, increasing claims settlement costs for primary insurers.
The report observes that litigation claims costs drove losses from Hurricane Irma and Hurricane Michael up materially, and contributed to the insolvency of several smaller Florida-only insurers in recent years.
Additionally, it notes that cost inflation associated with a sudden spike in demand for materials and labour will also increase losses from Hurricane Ian. This, coupled with the months or possibly years of rebuilding in some of the most impacted areas, further adds to the uncertainty.
