Hurricanes Helene and Milton battered Florida two weeks apart from each other in September and October, respectively, and wreaked havoc across the Southeast in the form of wind, storm surge, and torrential rain. The damage was extensive. CoreLogic estimated up to $47.5 billion in total damages from Helene and up to $34 billion from Milton.
Although the damage from the recent hurricanes was confined geographically, with billions in losses hitting insurers, CFOs charged with cost and risk management are likely to be concerned about the potential for insurance rate hikes on their organization’s policies.
Long-term view. While the economic losses impact this region, the hurricanes probably won’t lead to dramatic increases for businesses when the time comes to renew policies, according to Mike Rouse, leader of insurance broker Marsh’s US property practice.
That’s not to say there won’t be any effect on insurance rates. But carriers are well-suited to absorb the hit, according to Rouse. So it’s less likely that finance leaders will see their property insurance rates skyrocket as a result.
He noted that Marsh’s portfolio of customers has weathered rate increases for the last nearly seven years. Their deductibles have increased as well.
But more recently, some clients have seen prices moderate or even decline—primarily because of ample market capacity “and clients having choice” of coverage. Marsh clients with layered structures—meaning they have multiple property policies with different insurers—enjoyed some rate decreases. Those with single-carrier policies have seen slight increases in the “low single digits” so far this year.
Before the recent storms, Rouse believed the cost of property insurance was set to continue moderating or declining. Insurance rates and coverage levels also seemed “at a point that the markets felt were appropriate for the risk.”
While rates for individual insurance customers vary based on a wide range of factors, Rouse broadly noted that clients who were renewing policies on Nov. 1 were still seeing favorable rates and capacity. So far, the reported hurricane losses among Marsh clients were perhaps lower than expected, according to Rouse.
The full impacts of the hurricanes will depend on how much their damages affected carriers’ profitability, Rouse said. If insurance companies remain profitable despite these losses, then finance leaders can stress less about rates and coverage availability when it’s time to renew their policies.
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CFO Brew recently examined the results of major insurers that have reported Q3 earnings. In an Oct. 15 earnings release, for example, Progressive noted that the losses it incurred from Milton didn’t reach its reinsurance program threshold.
In an Oct. 17 earnings release, Travelers reported that CAT losses added 6.2 points to its business insurance segment’s Q3 combined ratio—a measure of underwriting profitability, where anything below 100% indicates an underwriting profit. Even with the CAT losses, Travelers reported a healthy 95.8% combined ratio in this segment, a 3.3-point YoY improvement despite Travelers racking up smaller CAT losses in Q3 2023.
“With the significant amount of capacity still in the marketplace, desire to deploy it, [and] people still feeling as though there’s adequate returns for their capacity that they’re deploying in the property market space, I tend to think it’s going to continue to lead to a competitive market,” Rouse said. In other words: Insurance buyers should see as many options for coverage as they have recently, and shouldn’t necessarily fear that their options will be limited or their prices will increase.
Bigger picture. But the hurricanes aren’t the only source of insured losses this year. For example, Rouse noted some significant Q2 losses in the US from severe storms. That’s why he will be eyeing total losses once the year is up.
“It’ll be interesting to see where ultimately losses end up for the year, if we start thinking about it on a full calendar year and just the significant events,” since insured losses in the aggregate will “dictate where the market starts to go in 2025,” Rouse said.
So, it’s not just the losses from hurricanes that could increase rates or decrease coverage options, but all the storms that happen this year. And those aggregate losses will in part determine whether CFOs can expect to be paying more, the same, or (in a perfect world!) less for their property insurance.