Residents of mobile homes clean up debris in the aftermath of Hurricane Ian in Fort Myers, Florida, on September 29, 2022
New York (AFP) – With homes and infrastructure destroyed by winds or floods and businesses closed, the devastation caused by Hurricane Ian is expected to cost Florida tens of billions of dollars and hurt the broader US economy.
The devastation will affect insurers in the southern US state, and poses a risk to uninsured homeowners as well.
After making landfall on Florida’s southwest coast on Wednesday, Ian brought strong winds and torrential rain, sometimes turning streets into rivers.
Damage estimates are still very preliminary, but it is clear that “the hurricane is expected to severely disrupt economic activity over a period of 10 days, with power cuts, flights canceled, power production suspended, and impact on agricultural crops on farms, especially oranges”, Gregory Daco, an economist at EY-Parthenon, told AFP.
And Ian predicted that Florida’s economic activity would slow six percentage points in the third quarter, and cut three-tenths of US gross domestic product.
As with all natural disasters, he said, this economic impact will gradually diminish over time, especially when reconstruction efforts begin.
Property analytics firm CoreLogic said wind-related losses from residential and commercial properties could cost insurers up to $32 billion, while flood-related losses could reach $15 billion.
Fox weather reporter Robert Ray takes pictures of boats destroyed by Hurricane Ian in Fort Myers, Florida, on September 29, 2022.
“This is the most expensive storm in Florida since Hurricane Andrew made landfall in 1992, and a record number of homes and properties were lost due to Hurricane Ian’s severe and destructive characteristics,” CoreLogic’s Tom Larsen said in a statement.
Fitch Ratings and S&P Global Ratings estimate the total cost could be as high as $40 billion.
Meanwhile, losses from Modi’s projects to insurance companies could reach $55 billion, and lost economic activity in Florida could reach $10 billion.
The average damage estimate, adjusted for inflation, is $46 billion, making Ian among the 10 costliest hurricanes in the United States, according to Moody’s, led by Katrina in 2005 ($160 billion), Harvey ($124 billion) and Maria (111 billion) in 2017.
These preliminary estimates do not take into account property without flood insurance, which accounts for the vast majority of properties in Florida, with insurance premiums exceeding those in many other states.
Many large insurers have reduced their exposure in the state, while smaller companies have gone bankrupt. National and state agencies often provide emergency assistance, such as temporary housing, to affected families, but assistance is limited.
According to data from risk management firm Milliman, which was provided to AFP on Friday, only 18.5 percent of homes in counties subject to evacuation orders have policies with the National Flood Insurance Program.
The federal government program is available in flood-prone areas, and offers coverage that many private insurance companies do not.
“Florida obviously has more environmental risks than a lot of other states just because of its geography, because of the way the climate is changing, with more devastating storms and sea level rise,” Dennis Rapmond of Moody’s Analytics told AFP.
This situation is complicated, she said, by the fact that attorneys and contractors often encourage Florida residents to file compensation claims, which insurers then challenge.
Rappmund noted that in 2019, the state accounted for only eight percent of insurance claims nationwide but more than 75 percent of claims that went to litigation.
“It stands to reason that we may see more liquidations” of insurance companies in the wake of Ian, Rapmond said.