GlobalData: Hurricane damages significantly impact profitability US insurers

October 22, 2024

Recent hurricanes Helene and Milton that have struck the US resulted in widespread devastation, claiming hundreds of lives and causing huge property damages.

Hurricane Helene, which struck Florida's Big Bend region as a Category 4 storm on September 26, 2024, resulted in catastrophic flooding throughout Florida, North Carolina, South Carolina, Georgia, and Ohio. The parts of the US were battered again by Hurricane Milton on October 9, 2024. As a result, US insurers are expected to witness higher claims in 2024 across general insurance lines, which could significantly impact their profitability, according to GlobalData, a leading data and analytics company.

As per the Office of Insurance Regulation, a total of 112,926 insurance claims for hurricane Helene have been filed as of October 9, 2024, with estimated insured losses amounting to $1.1 billion. Among these claims, 52,070 pertain to private passenger automobiles, followed closely by 50,672 residential property claims. Additional reported damages encompass commercial vehicles and commercial property losses.

Manogna Vangari, Insurance Analyst at GlobalData, comments: 'Hurricane Milton was a formidable storm that resulted in a landfall to the south of Tampa Bay, near Siesta Key, leading to multiple tornadoes, particularly across South Florida. The hurricane Milton presents a considerable risk to the densely populated region of Florida that might result in even higher costs than those associated with Hurricane Helene. According to the White House briefing, the damage from Hurricane Milton is estimated to be more than $50 billion.'

Property insurance claims are expected to account for a 12.9% share of the total general insurance claims in 2024, amounting to $227.5 billion. However, with these events, the actual claims in 2024 might increase once the complete impact of both hurricanes is realized. As a result, the overall profitability of the general insurance industry in the US is expected to be significantly impacted, with the average combined ratio exceeding 100% in 2024.

According to GlobalData’s Global Insurance Database, the US general insurance industry is expected to grow at a CAGR of 7.1% over 2024–28, from $2.4 trillion in 2024 to $3.1 trillion in 2028, in terms of gross written premiums (GWP).

In the US, standard homeowners' policies do not encompass flood coverage and must be acquired separately, often directly from the federal government. Flood insurance is mandated for homes situated in high-risk areas as determined by the Federal Emergency Management Agency (FEMA), particularly if the mortgage is government-backed.

As per the Insurance Information Institute, nearly 6% of US homeowners possess flood insurance. In several counties across Georgia, North Carolina, and South Carolina that were recently inundated by the effects of Helene, less than 1% of households have flood insurance. Nearly two-thirds of these policies are provided through the National Flood Insurance Program (NFIP) administered by FEMA, while the remaining are secured through private insurers.

The aftermath of hurricanes Helene and Milton has cast a spotlight on the significant deficiencies within the US flood insurance framework and the ensuing repercussions. As climate change intensifies the frequency and severity of flooding, the need for comprehensive flood risk management has become increasingly critical.

Vangari concludes: 'The recent spate of natural disasters may result in higher-than-anticipated claims for US insurers and reinsurers in 2024 and 2025. The escalating incidence of such significant events is projected to drive the need for a comprehensive flood risk cover, which will support general insurance growth over the next five years.'