Janice R. Andrews
Due to its comparatively milder winds and landfall in a remote region of Florida, Hurricane Debby may have spared insurers and property owners from financial ruin, but many people along its 270-mile course inland are certain to suffer financially as a result of the accompanying floods and rain. Most of that loss is probably not covered by insurance.
Debby made landfall on Monday at Steinhatchee, a seaside community in Florida’s Big Bend, around 20 miles from the Category 3 hurricane landfall of Hurricane Idalia on August 30. Georgia and South Carolina were being flooded by the hurricane as of Tuesday afternoon, and five people have died as a result of storm-related accidents.
Minimal Damage but Severe Flooding
According to state officials, the extent of property damage caused by strong winds, heavy rain, and storm surge is “modest” compared to what Floridians have become accustomed to fearing and then experiencing similar events.
During a Monday briefing at the state Emergency Operations Center in Tallahassee, Gov. Ron DeSantis stated, “This is incredibly modest compared to what we’ve dealt with in past storms.” “What we’re witnessing is not comparable to Hurricane Ian or Idalia in any way.” According to DeSantis, areas south of the landfall region, including Sarasota, Bradenton, St. Petersburg, and Clearwater, were also submerged.
Less Loss Potential in Rural, Sparse Population
About 500 people live in Steinhatchee, which draws hunters and anglers to its beaches. Experts predict that the low population density and low-density structures will minimize the storm’s possible financial damage.
“It most likely won’t be a major loss event for Florida property insurers, given the storm’s magnitude (low-end Category 1 winds) and its landfall in a relatively sparse area of Florida,” stated Mark Friedlander, a representative of the industry-funded Insurance Information Institute.
Disaster-modeling businesses did not yet have the storm’s financial effect accessible on Tuesday afternoon, but industry leaders anticipate that information would be released within the next several days. State Farm stated that 1,200 homeowner and vehicle claims had been made in relation to the hurricane within 24 hours of impact. A firm statement indicates that an increase in that number is anticipated.
Shortly after the storm made landfall on Monday, Gallagher Re, a global reinsurance broker that charges a fee to absorb part of the risk that insurers carry, released a statement stating that the storm is predicted to be “manageable” for the global reinsurance market, which frequently sets the price of property insurance premiums in the face of rising risks.
Flooding: The Hidden Risk to Finances
The financial services firm Moody’s, which performs catastrophe modeling, has not yet disclosed its assessment of Debby’s financial cost. The business did, however, post a statement from a climate economist pointing out that Debby emphasizes how hurricanes don’t always need to reach Category 5 windspeeds in order to do financial harm.
Debby “is carrying a massive amount of precipitation which is resulting in flash flooding in parts of Florida, Georgia, South Carolina, and North Carolina,” according to Chris Lafakis of Moody’s Analytics. The financial consequences of Debby are increasing because of things like closed roads, canceled flights, blackouts, closed businesses, and missed travel opportunities.”
Idalia’s privately insured losses were estimated by Karen Clark & Co. to have totaled $2.2 billion in a flash assessment following the hurricane. The Boston-based business is thought to be among the best in the nation for catastrophe modeling. A few months later, the National Hurricane Center calculated that Hurricane Idalia had cost $3.6 billion in total damages.
Losses Are Enhanced by Absence of Flood Insurance
But a large portion of Hurricane Debby’s damage might not be covered by insurance. According to Friedlander, just 19% of property owners in the state have flood insurance. As Monday afternoon wore on, several Sarasota streets were still flooded. Reportedly, hundreds of locals needed to be evacuated from places that were flooded.
A hurricane similar to Debby has traditionally resulted in insured damages of less than $1 billion, according to a statement from Gallagher Re. However, the overall cost of prior storms that resulted in extensive flooding has been far more than what was insured. Gallagher Re reports that Hurricane Florence, which hit the Carolinas in 2018, caused $30 billion in economic damages, of which just $7 billion were covered.
Florida’s Insurtech Sector Under Danger
Following a string of devastating hurricanes that began with Hurricane Matthew in 2015 and added to the hammering inflicted by litigation and financial markets hesitant to assist insurers in insuring their risk, Florida’s insurance sector has been operating on life support.
However, one of the businesses that helps assume the risk of the terrible calamity that comes with living on a peninsula surrounded by warm waters seemed unfazed by Debby’s impending blow.
According to industry sources, specialist catastrophe bond fund manager Plenum Investments released a statement on Sunday prior to Monday’s landfall stating that it did not anticipate the insured losses from the storm would have a detrimental impact on its catastrophe bond funds. When a catastrophe loss is experienced, catastrophe bond funds provide payments.
It would be interesting to observe how much of a financial impact Hurricane Debby has as it comes onshore. Although Florida may not have seen a big insured loss event due to the storm’s lesser winds and sparsely populated landfall location, the extensive flooding still presents a considerable uninsured risk. Only 19% of Floridians have flood insurance, meaning that many home owners may have to pay a significant amount out of pocket as they deal with the storm’s aftermath.
