Hurricane Ian is expected to financially ruin countless people in Florida whose homes were not covered by flood insurance when the storm inundated the region with powerful ocean surges and damaging downpours.
The personal financial losses are a reflection of Ian’s intensity and the fact that millions of Americans nationwide haven't bought flood insurance. The federal government's National Flood Insurance Program — the dominant source of flood coverage in the U.S. — protects only a tiny fraction of homeowners, almost all of them in coastal areas.
Ian's web of damage was unusually widespread as the hurricane drove storm surge onto coastal areas and triggered river overflows and flash flooding across inland Florida, where almost nobody has flood insurance.
President Joe Biden declared nine counties disaster areas Thursday, making residents eligible for federal aid to pay for minor home repairs, short-term housing and other emergency costs.
But of the 1.8 million households in those nine counties, only 29 percent have federal flood insurance, according to an analysis of government records by POLITICO's E&E News.
That leaves 1.3 million households at ground zero without federal flood coverage.
In Hardee County, only 100 households have federal flood insurance — out of 8,000 households in the county.
That’s a 1.3 percent coverage rate.
Hardee has one of the lowest income levels of any Florida county, and 44 percent of its residents are Hispanic.
“Ian could financially ruin thousands of families in Florida. There’s no better way to say it,” said Mark Friedlander of the Insurance Information Institute.
Flood coverage is not included in homeowners’ insurance policies. That forces people to buy flood insurance separately, though almost no one who lives inland from a coastal area does. The vast majority of flood coverage in the U.S. is sold through the Federal Emergency Management Agency’s National Flood Insurance Program. It is unclear how many people have flood policies through private insurers.
People without flood insurance “could be devastated,” Friedlander said.
Problems, problems, problems
At the same time, the damage caused by Ian’s 155 mph winds could plunge Florida’s private insurance market into deeper chaos, potentially forcing additional insurers into insolvency and triggering a surcharge on almost every insurance policy in the state.
The Insurance Information Institute, an industry-funded research group, estimates that Ian has caused at least $30 billion in damage. That would make it roughly the 12th-costliest U.S. disaster since 1980, according to NOAA records.
Ian hit Florida as the state faces an insurance crisis. Policyholders there pay the nation’s highest property-insurance rates, and huge losses have forced six small Florida-based insurers into insolvency this year while others have stopped writing new policies.
That has pushed homeowners into Citizens Property Insurance Corp., the state-backed insurer of last resort. The number of its policyholders has doubled in the past two years and recently passed 1 million for the first time since 2014 (Climatewire, Sept. 19).
Insurer losses are due to a combination of extensive legal claims and huge payouts on policies in states such as Louisiana, which has faced two catastrophic storms since 2020.
“Florida is already having a problem with [insurance] availability. It’s having a problem with affordability. And it’s having a problem with reliability when insurance companies are going insolvent,” said Nancy Watkins, a principal at Milliman actuarial consultants. “All three of the pillars of a sustainable market are under threat.”
Friedlander said he expects Ian-related claims to drive several local insurance companies into bankruptcy, making it even harder and costlier for Florida homeowners to buy property coverage.
“Many insurers have been on the financial edge for several years. This may push them over that cliff,” Friedlander said.
The average property insurance rate in Florida is $4,231 — nearly triple the U.S. average of $1,544, according to the insurance institute.
A major issue as Florida begins to recover is the extent to which damage was caused by wind or by water. The question has huge implications for property owners without federal flood coverage and for private insurers that could face billions of dollars in wind-damage claims.
Florida Gov. Ron DeSantis (R) danced around a question about whether Citizens insurance has enough money to pay Ian-related wind claims. Instead, he emphasized the storm's damaging floods, which are usually covered by the federal government.
“We are looking at a lot of flood claims,” DeSantis said, adding that Citizens should be able to pay Ian claims without charging a special assessment on its own policyholders, or on all insurance policies in the state except for medical and malpractice coverage.
Watkins said disputes and litigation will arise when property insurers like Citizens deny claims because they say damage was caused by flooding — which they don't cover.
“In a litigious environment like Florida, that could be a perfect storm on top of a perfect storm,” Watkins said.
Records from the Florida Office of Insurance Regulation show that insurance companies denied roughly 30 percent of the nearly 1 million claims filed after Hurricane Irma swept across the state in 2017.
The denial rate in Florida for Hurricane Matthew in 2016 was roughly 40 percent.
Citizens has $13.6 billion in reserves and has projected paying 225,000 claims from Ian worth a total of $3.8 billion.
Higher temps, more inland floods
The good news for Florida is that it has more federal flood insurance policies than any other state — at about 20 percent of households. That's second only to Louisiana. Nationwide, only about 4 percent of properties are covered through FEMA’s flood insurance program.
But the bad news is that flood coverage varies widely across Florida — and among the counties that have faced the worst damage from Ian.
In the nine counties that Biden declared a disaster, coverage rates for flood damage range from 1.3 percent in Hardee County and 3.2 percent in DeSoto County to 67 percent in Collier County, which is in the state’s southwest corner and is one of Florida’s richest counties.
“There are going to be a lot of folks without flood coverage,” said Carolyn Kousky, a leading expert on flood insurance and associate vice president for economics and policy at the Environmental Defense Fund. “If you don’t have insurance, economic recovery from these events is really hard.”
Some parts of Florida suffered huge flooding and are not among the nine counties that Biden declared a disaster.
Orlando, which is Florida’s third-largest city, experienced up to 15 inches of rain and saw flash floods, according to the National Weather Service. The city has 130,000 households.
Yet records show that only 2,039 buildings are covered by federal flood insurance.
That’s a coverage rate of 1.5 percent.
Inland flooding caused by Ian “highlights the fact that as climate is changing storm patterns, we’re seeing lots of flooding away from the coasts from stalled hurricanes and intense precipitation,” Kousky said. “Lots of areas are at risk of flooding.”
People without flood insurance will have to rely on FEMA aid, which is capped at $72,000 but usually results in payments of less than $10,000.
When flash flooding devastated eastern Kentucky in July and August, only about 2 percent of the households in the flooded area had flood insurance (Climatewire, Aug. 9).
FEMA has given $73 million in disaster aid to 7,800 Kentucky residents — an average of about $9,350 each.
A version of this report first ran in E&E News’ Climatewire. Get access to more comprehensive and in-depth reporting on the energy transition, natural resources, climate change and more in E&E News.