Fitch: Hurricane Helene Unlikely to Impact Florida Reinsurers

Despite the significant damage caused by Hurricane Helene, Fitch Ratings anticipates that the storm will not substantially impact the credit ratings of Florida's property and casualty re/insurers, Citizens Property Insurance, or the Florida Hurricane Catastrophe Fund (FHCF). However, the hurricane may trigger the National Flood Insurance Program's (NFIP) catastrophe reinsurance.

Estimated Losses and Reinsurance

Fitch Ratings has projected insured losses from Hurricane Helene to fall within the $5 billion to $10 billion range. This substantial figure reflects the extensive damage caused by the storm's powerful winds, storm surge, and subsequent flooding across the southeastern United States.

Why the minimal impact?

Despite the magnitude of these losses, Fitch suggests that they are unlikely to exceed the rating sensitivities of individual insurance companies. In simpler terms, this means that the financial impact of Helene, while significant, is not expected to significantly threaten the financial stability or credit ratings of most insurers.

Key Factors:

• Strong Capitalization: Insurers typically maintain substantial capital reserves to absorb losses from catastrophic events like hurricanes. These reserves act as a financial cushion, enabling them to pay out claims without jeopardizing their solvency.
• Premium Adjustments: Insurers have the ability to adjust their premium rates to account for increased risk or significant losses. This allows them to replenish their capital reserves and maintain their financial strength over the long term.
• Reinsurance: Many insurers utilize reinsurance, essentially insurance for insurance companies. This helps to spread the risk of large losses, further mitigating the financial impact on individual insurers.

Flood Insurance Gap

The impact of Hurricane Helene is likely to expose the significant flood protection gap in the insurance market. Standard homeowners' insurance policies typically exclude flood damage, and despite the growth of the private flood insurance market, it still accounts for less than 1% of the industry's direct premiums written.

NFIP Reinsurance

The National Flood Insurance Program (NFIP), managed by the Federal Emergency Management Agency (FEMA), is a crucial backstop for flood insurance coverage in the United States. Given the widespread flooding caused by Hurricane Helene, Fitch Ratings anticipates that the NFIP's reinsurance program will likely be triggered.

What is Reinsurance?

Reinsurance is essentially insurance for insurance companies. It allows the NFIP to transfer a portion of its risk to private reinsurers, protecting the program from excessive financial strain in the event of a major flood catastrophe.

NFIP's Reinsurance Program

The NFIP has a comprehensive reinsurance program in place. In January 2025, FEMA renewed its reinsurance coverage, securing $619.5 million in protection from private reinsurers. This coverage is designed to absorb a portion of the NFIP's losses that exceed $7 billion from a single flood event, such as Hurricane Helene.

Why is this Important?

• Financial Stability: Reinsurance ensures the NFIP's ability to pay claims even after a major flood disaster, protecting homeowners and maintaining the program's financial stability.
• Risk Sharing: By transferring a portion of its risk to private reinsurers, the NFIP shares the burden of large-scale flood events, promoting a more stable and sustainable insurance market.
• Increased Capacity: Reinsurance allows the NFIP to provide greater flood insurance capacity, ensuring that more homeowners have access to this critical protection.

The Impact of Helene

If the losses from Hurricane Helene exceed $7 billion, the NFIP's reinsurance coverage will be activated. This will help to offset a portion of the NFIP's claims payouts, ensuring that the program can continue to provide essential flood insurance coverage to homeowners in need.

Florida Market

Florida represents a significant portion of the NFIP's policies, with 37% of policies underwritten in the state. Citizens Property Insurance, Florida's insurer of last resort, holds a leading market share in both personal and commercial lines. Fitch believes that Citizens and the FHCF have sufficient resources to meet their current obligations.

Wrapping Up

While Hurricane Helene is a significant event, Fitch believes that the Florida reinsurance market is well-equipped to handle the losses. The potential triggering of the NFIP's catastrophe reinsurance program highlights the importance of flood insurance and the role of private reinsurers in managing flood risk.