Hurricane Helene unlikely to impact FHCF or Citizens ratings: Fitch

Hurricane Helene is not likely to affect credit ratings for property/casualty re/insurers, Citizens Property Insurance or the Florida Hurricane Catastrophe Fund (FHCF), according to Fitch Ratings.

Fitch based its assessment on its initial estimate of an insured loss range between $5 billion and $10 billion. The assessment also anticipated Individual insured losses to stay within rating sensitivities due to insurers’ ample capital levels and ability to raise premium rates.

Hurricane Helene, which made landfall in the sparsely populated Big Bend region of Florida as a Category 4 hurricane and moved through the southeast US as a tropical storm.

It has resulted in the tragic loss of life and significant economic and insured losses. Among the impacted areas, Florida will be meaningfully affected by heavy rainfall, storm surge, flooding and high winds, Fitch stated.

However, Georgia’s losses may exceed Florida’s due to strong sustained winds across highly populated areas. Fitch also expects the Carolinas, Tennessee and Kentucky to also experience losses.

Standard homeowners’ insurance does not typically cover flood damage, and even though the private market for flood insurance has grown, it remains less than 1% of industry direct premiums written.

The relatively small exposure limits the loss potential for the industry, analysts explain. Fewer than 15% of homeowners buying insurance purchase primary flood insurance, with even lower take-up rates away from the coasts with less historical flooding.

However, mortgage lenders require flood insurance if a homeowner has a federally backed mortgage and lives in a Federal Emergency Management Agency (FEMA) high-risk flood zone or if they have received prior FEMA compensation for flood damage.

Homeowners typically purchase flood insurance through the National Flood Insurance Program (NFIP), a government-supported flood insurer run by FEMA.
Private market reinsurance coverage for the NFIP may trigger as a result of Hurricane Helene’s expected flooding and storm surges.
Thirty-seven percent of the NFIP’s policies are underwritten in Florida, the highest percentage of any state with over 1.7 million policies.
Private reinsurers, which will likely continue withdrawing from the market, would be most affected by a loss from the NFIP’s catastrophe reinsurance in the event of a major hurricane, Fitch noted.

“Most large national underwriters do not have substantial market share in Florida. Florida’s state-owned property insurer Citizens, the insurer of last resort in Florida, has leading market share in both personal and commercial lines,” analysts stated.

Adding: “Citizens and FHCF have sufficient resources to meet current obligations. Florida homeowners’ insurance specialists will absorb losses, as Helene is likely not severe enough to trigger most excess of loss reinsurance coverages.”

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