My insurance Education for you today – must read! -Part I (of 4 parts – to encourage you to take the time to read ALL FOUR)

My insurance Education for you today – must read! Experts Predict Impacts of $25Billion plus - Milton Hit to Insurers, Reinsurers -By Susanne Sclafane | October 9, 2024 -Insurance Journal Magazine – Part I (of 4 parts – to encourage you to take the time to read ALL FOUR)

A wide cone of uncertainty surrounds insurance experts’ pre-landfall predictions about the state of the industry that will prevail in the aftermath of Hurricane Milton, with most viewing it as a $20 billion-plus loss event.

Amid the volumes of commentary from risk modelers and insurance experts in advance of the storm’s Florida landfall, forecasts included everything from the prospect of higher prices for property-catastrophe reinsurance to the end of the state-backed insurance system and an availability crisis that brings the federal government into the Florida insurance market, if only temporarily.

Analysts for Keefe, Bruyette & Woods were among those to comment on potential reinsurance market impacts in research notes published on Monday and Tuesday, indicating that insurance industry losses would likely be well above $10 billion. The more extreme impacts were contemplated by Ian Gutterman, a longtime investor and industry analyst, in a blog post titled “Hurricane Milton–The End of the Florida Insurance Experiment?” published on Tuesday.

Gutterman, founder and CEO of Informed Group Inc., can envision industry insured loss scenarios as high as $50 billion and $100 billion. Noting that a total coming in under $25 billion “seems optimistic,” Gutterman also predicted more insolvencies of some thinly capitalized Florida insurers, the end of the Florida Hurricane Catastrophe Fund, and a “meaningfully impaired” but surviving insurer of last resort, Citizens Property Insurance Corp.

Between those extremes, Andrew Siffert, senior meteorologist for specialist insurance and reinsurance broker BMS Group, wrote, “Milton could reshape the insurance market in Florida for years to come,” in a BMS Tropical Update published online yesterday. “It is safe to say this will likely be at least a $20B dollar event. This is solely based on a review of the low end of the catastrophic modeling guidance and some of the historical analogs like the 1921 Tarpon Spring/Tampa Bay Hurricane that today would cause over $25B in insurance industry losses,” he wrote.

While there were many more pre-landfall analyses delivered to Carrier Management’s editors’ email inboxes this week—from Moody’s, Howden Re, Acrisure and Guy Carpenter, among others—we limit this summary to highlights of the remarks of the KBW analysts, Gutterman and Siffert, offering what seems like a representative sample of what insurance experts were saying and thinking as Milton approached the U.S.

A Top-10 U.S. Weather Event -All commenters noted the uncertain trajectory and landfall strength at various times on Tuesday, but a common assumption is that Milton will make landfall as a Category 3 or 4 storm close enough to Tampa to produce property damage and economic impacts of historic proportions. “Currently, the Sarasota and Tampa areas are bracing for what could be one of the top 10 most destructive weather events in U.S. history,” wrote Siffert.

A direct landfall on Tampa at the Category 4 level of the Saffir-Simpson Scale would result in losses similar to those from two major storms in the 1920s—the 1926 Miami hurricane or the 1928 Lake Okeechobee hurricane—or a more recent one remembered by some insurance professionals in practice today, Hurricane Katrina in 2005.