Hurricanes Amplify Insurance Crisis in Riskiest Areas

Until late last month, there was optimism in the insurance industry. Hurricane season had been quiet and the number of wildfires was still below the yearly average. Insurers were beginning to hope that the cost of reinsurance — that is, insurance for insurers — would only inch up next year, instead of shooting higher as it did the previous two years.

Two major hurricanes have upended their calculations.

Total economic losses from Hurricane Milton and Hurricane Helene could soar over $200 billion, according to early estimates. While it’s far too soon to know exactly what portion will be covered by insurance companies, some consumer groups, lawmakers and analysts are already worried about a big hit to insurers’ finances that could ultimately affect millions of people living in the most vulnerable areas.

As climate change increases the intensity of natural disasters, insurance companies have pulled back from many high-risk areas by raising premiums or ending some types of coverage. The fallout from the two hurricanes, which landed within the span of two weeks, could accelerate that retreat. It could also further strain an already feeble federal flood insurance program that has filled in gaps for homeowners living in areas where private insurance companies no longer offer flood coverage.

Hurricane Milton, which hit Florida’s west coast as a Category 3 storm on Wednesday, did not ultimately cause the catastrophe that had been predicted for the Tampa Bay area. But it still did plenty of damage.

Sridhar Manyem, an analyst for the insurance industry ratings agency AM Best, said that while it was too early to estimate insurers’ obligations, industry insiders were already beginning to compare Milton to Hurricane Ian, which caused more than $55 billion of insured losses in 2022 when it hit the same area.

“Because of lack of information at first blush, usually people do this,” Mr. Manyem said. “This storm is pretty comparable to another storm in terms of size and path and intensity, so we can try to figure out what an inflation-adjusted loss would be.”