‘This is the worst-case scenario’: Hurricane Milton could clobber Florida’s insurance market

TALLAHASSEE, Florida — The long-dreaded big one is about to reach Florida. And the expected billions in damage from Hurricane Milton could also wreck the state’s still fragile insurance market and potentially disrupt the state’s economy.

The storm-prone state has been reeling from insurance problems for years, including spiking premiums for homeowners and insurers retreating completely from the state. Despite some fixes that lawmakers and the industry hoped will stabilize the market, a major storm hitting a heavily populated area — like Milton is projected to do — could erase any progress and send the market into a tailspin.

“This is the worst-case scenario,” said former state Sen. Jeff Brandes, who is now the president of the Florida Policy Project, a research institute focused on issues like insurance and housing.

Milton is a powerful Category 4 storm expected to slam into the state’s west coast sometime on Wednesday evening or early Thursday. It is expected to bring with it massive storm surge and intense wind speeds into a heavily populated area of the state along the Gulf Coast. Millions in the area were told to evacuate ahead of what’s looking like a catastrophic hurricane.

The fear is that the storm will cause extensive damage in the Tampa Bay region, including in Pinellas County, a peninsula jutting off from the larger Florida peninsula between the Gulf and the bay that is susceptible to storm surge. Homes throughout the county were flooded just two weeks ago when Hurricane Helene passed by the region before it slammed into the northern part of the state.

Fred Karlinsky, a well-known insurance lawyer and one of the most influential insurance lobbyists in the state, put it this way: “We have always said the biggest fear we had in the industry was a Cat 5 going into Tampa Bay or Miami, so we’re coming pretty darn close to that.”

This marks the second major hurricane to hit the state this year and third one overall.

Helene, which caused major damage in several states in the southeast — including North Carolina — during its deadly path two weeks ago, is expected to cause about $11 billion in insured losses nationally, according to an estimate released on Tuesday by Moody’s. So far, insurance companies have reported more than $1 billion in losses in just the Sunshine State.

Milton could be significantly more destructive. CNBC quoted Wall Street analysts that projected Milton could be one of the most expensive storms ever to hit Florida, and losses could easily exceed $50 billion.

This “ferocious” storm, as Gov. Ron DeSantis called it this week, comes as the state’s insurance market is trying to stabilize following a period where it nearly collapsed. Past natural disasters and litigation led to the failure of several insurers, while others cut back coverage and raised their rates substantially. Citizens Property Insurance, a state-created insurer of last resort, exploded in size as an increasing number of Floridians had nowhere else to go.

The insurance crisis is among Florida voters’ top issues: An August poll from the state Chamber of Commerce found that it ranked ahead of immigration, the economy and abortion.

DeSantis and the Republican-controlled Legislature responded in late 2022 by cracking down on lawsuits against insurers, a move that Karlinsky said “saved the industry from going down.” But some called the changes a bailout for insurers. Just last week Rep. Matt Gaetz , the conservative GOP firebrand and potential candidate for governor in 2026, said legislators “messed up on insurance because they have been too captive to the insurance industry.”

The governor and other state officials have defended the changes and pointed out that many insurers did not raise rates this year, while some companies have started to move back into the state. Citizens — whose financial health is a topic of constant scrutiny — said it was planning to transfer tens of thousands of policies to private companies later this year.

That progress, however, could all be washed away by Milton.

DeSantis said this week it’s “too early” to figure out exactly how Milton will impact the insurance industry. But some, like Brandes, are fearful that the losses could be enough to push some companies into insolvency. AM Best, an insurance rating agency, warned on Wednesday that for Florida-specific insurers losses from Helene and now Milton “could prove too devastating for some of them.” It added that the “impact of both storms could very well flip the script for 2024 results and reverse the positive trends observed thus far.”

Mark Friedlander with the Insurance Information Institute, an industry association, said that “Florida insurers are well-prepared to act as financial first responders to their customers who may be impacted by Hurricane Milton.”

Milton’s expected storm surge will bring flooding damage, which is not covered by traditional homeowner policies and instead is covered by the National Flood Insurance Program or private flood insurers. Friedlander said about 20 percent of Florida homeowners carry flood insurance.

Still, Friedlander said Milton will bring hurricane-force winds to a large swath of the state. He said there “is a higher probability that Milton will cause more wind damage than the previous two storms combined. Florida insurers are ready to handle a high volume of storm claims.”

Karlinsky said that Florida is “better positioned than we would have been two or three years ago.”

But the impacts from Milton could go well beyond this storm season. It could prompt reinsurers — companies that provide backup financing to insurers — to raise their rates which would then be passed on to consumers in 2025. Floridians already pay the highest homeowner premiums in the nation and it has been a leading issue for the state’s voters. There are already predictions it could become the focus of the 2026 governor’s race for residents weary of paying ever-higher premiums.

“I don’t see how this will help by any stretch of the imagination,” said Charles Nyce, a Florida State University professor who specializes in insurance and risk management. “This will put a stress on our current market. This will be a test of how stable our private market could be.”

Milton could also spark debate again in Washington, D.C., about the need for a national catastrophe insurance program. House Speaker Mike Johnson , during a visit last week to Steinhatchee after it got battered by Helene, said it was something to consider.

“These coastal communities are a big part of America and we’ve got to make sure that we can take care of them,” said Johnson, who is from Louisiana, another state frequently hit by hurricanes. “These are big storms of great magnitude and Congress has to address this seriously. I think they will.”

The storm could also place a great deal of stress on Citizens, which currently has more than 1.26 million policies — including hundreds of thousands on the state’s west coast, with its total insured values worth more than $100 billion for six counties on the Gulf Coast. Citizens currently has a nearly $6 billion surplus, as well as backup reinsurance coverage. But if it runs out of money, it could place a surcharge — called a “hurricane tax” by critics — on nearly every insurance policy in the state including auto insurance.

“We know many of our policyholders in the Bay Area are still reeling from Helene,” Tim Cerio, the Citizens CEO, said in a statement. “However, we want to assure them, as well as all Citizens policyholders, that we have the financial wherewithal to take care of them after Milton passes.”

Brandes, the former state senator, had always been optimistic that the recent changes would help Florida’s market. But he’s often added the caveat that Florida getting hit by a major storm could roil the market.

“This is the big storm, this is the thing that will keep rates from going down,” said Brandes.

Zack Colman contributed to this report.