Hurricanes Helene and Milton: Impacts on the Insurance Industry

2024 was a memorable hurricane season for those living in the Sunshine State, particularly along the western coastline of Florida. In late September, Hurricane Helene struck the Big Bend portion of the state as a category 4 hurricane with winds of 140 miles per hour [1]. However, impacts from Helene were felt well away from the landfall, as spots such as Tampa Bay saw over 7 feet of storm surge, the largest that had been seen in over 100 years [1]. The surge inundated coastal communities, leading to widespread losses as well as multiple drownings from those that did not evacuate.

Just a few weeks later, Hurricane Milton would add insult to injury when it made landfall on the west coast of Florida as a category 3 storm (Figure 1). Fortunately, Milton weakened significantly from its peak intensity as a category 5 with winds of 180 miles per hour over the Gulf of Mexico [2]. Nonetheless, the state would not be spared significant impacts, as many of the areas still reeling from Hurricane Helene were pushed to their limits. Not only did the Milton dump copious amounts of rainfall and led to storm surge inundation of nearly 10 feet in spots; it also led to a prolific tornado outbreak mostly concentrated in the eastern and central part of the state [2] (Figure 2). These tornadoes were violent, with the strongest report being an EF-3 tornado that touched down in St. Lucie and Indian River Counties with peak winds of 155 miles per hour [2].

            Fortunately, it seems that many heeded the evacuation orders issued during Hurricane Milton and avoided the significant risks they would have been exposed to if they stayed. However, in the aftermath of Helene and Milton, homeowners, regulators and the insurance industry have an important concern: what are the implications for the insurance industry? After Florida experienced the widespread destruction of Hurricane Ian in 2022, one of the strongest storms to ever hit the state, many insurance companies began leaving Florida in droves. The ones that remained began reducing their capacity by lowering their policy limits or increasing their deductibles, which meant that policyholders were left exposed to more of the financial burden on future claims [3]. So, with Florida experiencing another record-breaking hurricane season, what does the future of insurance hold?

Figure 1: Visible satellite image of Hurricane Milton approaching Florida, from NOAA’s GOES-16 satellite. Source: NOAA.

Figure 2: Image of all tornado warnings issued by the National Weather Service offices in Tampa Bay, Miami, and Melbourne on October 10 as Hurricane Milton was approaching landfall. Source: National Weather Service.

Firstly, the impacts of the 2024 hurricane season are still being felt and processed, and insurance companies will likely continue to adjust based on new information that comes in. However, it is believed that the losses from Milton could fully exhaust the 2024 natural catastrophe budgets of US property/casualty insurers [4]. Global reinsurers will also feel the impact, but to a lesser degree. Nonetheless, the way in which Milton affected Florida has brought up discussions regarding multi-hazard impacts and policyholder coverage.

Milton brought strong winds and was associated with numerous tornadoes, storm surge, flash flooding and riverine flooding. Furthermore, several of the hazards impacted the same locations. This is an issue in the United States, and especially in Florida, as property policies often provide coverage only for specific causes of loss [4]. For example, policies can include wind damage but exclude flood or water damage. This will be a hotly contested issue for policyholders and insurers, especially as the policyholders themselves were required to evacuate [4]. This makes it more difficult to indentify which hazard caused specific damage or which hazard caused the damage first. In addition, there is significant overlap between the areas impacted by Milton and Helene; Milton made landfall just south of Tampa Bay, and storm surge from Helene a couple weeks prior reached up to 7 feet in some areas of Tampa [5]

U.S. courts have adopted different approaches to resolve these issues. Some courts have ruled that coverage depends on whether the peril determined to be the dominant cause of damage is covered by the policy [4]. Different courts have ruled that when multiple hazards combine to produce a loss, then there is coverage as long as one of the hazards was covered by the policy [4]. Finally, other courts have ruled that the policyholder is responsible for differentiating and attributing which hazards caused what damage, irrespective of which hazards they are covered for. Some insurers have also opted to void coverage when a hazard not covered by the insurance policy is involved in any way. These have been termed “anti-concurrent causation clauses,” and while some courts have enforced them, others have ruled that they are unenforceable [4]. All these factors will likely lead to continued confusion and disputes between policyholders and insurers.

Regardless of the exact impacts to the insurance industry, one aspect remains true: over time, more damaging and costly storms will continue to drive long-term changes in both regulatory frameworks and markets, leading insurance providers to focus more on risk mitigation and climate-adapted insurance products.

References

1.     https://climatecenter.fsu.edu/images/docs/Hurricane-Helene-Summary-Report.pdf

2.     https://www.weather.gov/mlb/HurricaneMilton_Impacts

3.     https://www.bbrown.com/us/insight/impacts-on-the-florida-insurance-market-after-hurricane-ian/#:~:text=Insurers%20reduced%20their%20capacity%20by,implementation%20of%20tighter%20underwriting%20guidelines.

4.     https://riskfrontiers.com/insights/hurricane-milton-further-destruction-for-florida-and-implications-for-the-insurance-industry/

5.     https://storymaps.arcgis.com/stories/ca76a6bf17be46f68f60bec6cccdef8e