Irma's Florida impact less than initial fears
DALLAS – Hurricane Irma's run across Florida did not cause the level of damage initially feared, which should ease pressure on the bond-financed organizations the state set up to support the availability of property insurance.
Michael Peltier, spokesman for the state-run Citizens Property Insurance Corp., told The Bond Buyer that he expects about 200,000 claims.
“We have got claims paying ability to pay over a 100-year storm,” Peltier said.
Citizens covers those who cannot find property coverage on the open market and has $13.2 billion in claims paying ability, Peltier said. About $2.3 billion of that comes from the Florida Hurricane Catastrophe Fund, known familiarly as the “Cat Fund.”
Both the Cat Fund and Citizens issue bonds to bolster their balance sheets to prepare for storms that generate claims.
After 11 years with limited claims-paying events, the Cat Fund, set up in the wake of 1992's devastating Hurricane Andrew, estimates that it has $17.5 billion of total available resources for the 2016-17 contract year, exceeding the fund’s statutory reimbursement limit.
For the 2017-18 contract year, the fund estimates $1.1 billion in premiums, plus $1 billion in reinsurance coverage, resulting in total resources of $18.6 billion, which exceeds its statutory liability cap of $17 billion.
Irma’s landfall in Florida Sunday ended a lengthy hurricane reprieve for the state, which invested heavily in preparation after Andrew's devastation in 1992.
Although Irma affected most of the state, including both coasts, damages are not expected to reach the levels of Andrew, the most destructive hurricane in Florida’s history and second-most damaging in the U.S. after Hurricane Katrina in 2005.
The fact that the once-Category 5 hurricane was hitting Florida less than a month after Hurricane Harvey struck Texas stirred anxiety about the economic damage. AccuWeather predicted that the destruction from the two storms could reach $290 billion.
Stocks soared Monday on indications that Irma was not as damaging as expected.
Preliminary insured damage estimates range from $20 billion to $65 billion, according to various news reports. Before Irma made landfall, Barclays forecasters predicted damages in line with Hurricane Katrina in 2005, which cost about $50 billion in insured damages.
Enki Research analyst Chuck Watson cut his damage estimates for Irma to about $49 billion from the $172 billion he cited before the storm hit land.
As Moody’s Investors Service noted, it will take weeks for insurers to have a reliable estimate of losses.
“Extensive flood damage in Texas from Hurricane Harvey could hamper the availability of claims-adjusting resources and further slow the claims process,” analysts said. “Given the disasters, a sudden spike in demand for materials and labor will almost certainly increase losses from Harvey and Irma, and could push up rebuilding costs nationwide.”
Bond ratings for the scores of debt issuers in the state will not be immediately affected, the rating agencies said.
"Despite the widespread damage caused by Hurricane Irma, we anticipate the majority of affected local governments in Florida and the Southeastern U.S. will not suffer significant changes in credit quality given their adequate liquidity, market access, and experience reacting to major storms,” said Greg Lipitz, a Moody's vice president.
“We will monitor the impact of the storm on affected credits and anticipate they will receive significant state and federal assistance when cleanup and recovery begins,” he said. “Congressional support to assist local governments through FEMA will remain strong."
Although the hurricane veered toward the west coast of Florida as it made landfall, the National Weather Service reported Monday that flooding from a storm surge in Jacksonville on the upper east coast had exceeded a record set by Hurricane Dora in 1964.
As many as 6.5 million customers were without power across Florida, according to state officials.
“Primary property and casualty insurers will incur significant losses as a result of Hurricane Irma, particularly from the homeowners, commercial property and auto physical damage lines of business,” Moody’s said. “In particular, Florida-only insurers and their reinsurers will bear outsize losses, while large national primary insurers have considerable resources to withstand a significant event.”
The first line of recovery from the two storms – federal disaster funds – gained President Trump’s approval on Friday. Legislation providing $15.25 billion in hurricane aid for victims of Hurricanes Harvey and Irma was signed into law, along with a continuing resolution and debt limit suspension that will last 90 days through Dec. 8.
The House sent the legislation to the White House after voting 316 to 90 to more than double the amount of hurricane aid it approved earlier in the week.