The risks
There is no shortage of potential dangers in a state surrounded by water. The risk is especially serious this year, when the National Oceanic and Atmospheric Administration (NOAA) is Forecast Hurricane activity above normal in the Atlantic. The forecast calls for between 17 and 25 named storms and between 8 and 13 hurricanes, of which 4 to 7 will be classified as major hurricanes in categories 3, 4, or 5. That’s a lot of opportunities for property damage, and one of the reasons why homeowners insurance in Florida has gotten out of control.
CoreLogic data shows that nationally, the average homeowners insurance premium increased 35% between 2021 and 2023. But in Florida, that increase was nearly double the national average: 68%.
And insurance has more to cover than ever in some Florida counties. In the chart below, you can see the counties at highest risk of physical loss from future hazard events based on CoreLogic Climate Risk Analysis.
The graph shows the estimated annual losses in terms of physical risk per year for 2050 under CoreLogic’s RCP 8.5 severe climate risk scenario. Of the 10 counties with the largest projected annual losses in terms of physical risk, four are in Florida, including the number one spot held by Miami-Dade County. There, CoreLogic sets the expected annual losses in terms of physical risk at $988 million per year, for a single county.
Other real estate markets in Florida face multiple dangers, and those dangers may overlap or be sequential. A recent CoreLogic White Paper defines some of these risks: “Wildfires, inland flooding, thunderstorms, and winter storms are climate hazards associated with hurricanes; They are also affected by changes in energy flows and water cycle patterns. These hazards can occur during hurricane season or can occur in sequence (hurricane then wildfire), and one hazard can foster another. “Excessive rainfall in one season can promote the growth of vegetation, which can then become a fuel reserve for forest fires in a dry season.”
The ‘green shoots’
So what’s the good news? Rogers highlighted several major developments in Florida that bode well for its housing market even amid its challenges.
First, the state has some of the best state building codes in the country, which help protect property (and people). That’s one reason newer construction works better against hurricane-force winds, a critical feature in a state that suffered extensive damage from Category 5 storms like Hurricane Ian in 2022 and Hurricane Irma in 2017.
Second, insurance companies are beginning to re-enter the Florida market after an exodus last year that saw 14 different insurance companies leave the state, which moved many of those policies to state insurance of last resort, Citizen Home Insurance. In January, Florida approved six new property insurance companies to enter the market and approved another eight companies in April. More options for homeowners should alleviate some of the rising upfront costs of insurance and offer more coverage if something happens.
Additionally, leaders at the county and state levels are taking action. For example, Broward County, ranked No. 7 on the list above, could suffer $330 million in losses by 2050 if it does nothing. That’s why Broward County updated its FEMA maps to expand the special flood hazard area by 15%, meaning an additional 90,000 properties will now be required to have flood insurance.
“Homeowners might say, oh no, now I have another bill,” Rogers said. “But in context, Hurricane Ian caused $18 billion of uninsured losses. If a homeowner had FEMA coverage (after Ian), he would receive between $9,000 and $10,000 for repairs. If they had flood insurance, they would receive about $66,000. “That gives you a great opportunity to get back to normal.”
Another bright spot for Florida is its efforts to curb frivolous lawsuits that attract reparation money. “Florida has 15% of all homeowners insurance claims in the US, but 71% of all lawsuits against claims,” Rogers said. Legal reforms over the last year they have reduced the money that goes to lawsuits rather than to homeowners who have suffered a loss.
Lastly, Rogers noted that Florida Governor Ron DeSanctis recently signed into law a bill for $200 million in hurricane mitigation improvements for homeowners.
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