Despite Helene's Record Size And Strength, Property Insurance Market May Weather The Storm
Hurricane Helene continued to punch across three states Friday as a weakened tropical storm after making landfall along Florida’s Big Bend region Thursday night.
Professionals across the commercial real estate and insurance industries woke up Friday morning to assess the devastation, which is expected to total billions of dollars. As of Friday evening, at least 25 people across the Southeast had been killed and millions were left without power and stranded amid historic rainfall and flooding.
But in Florida, the country's most vulnerable property insurance market, industry insiders were cautiously exhaling, optimistic that the worst-case scenario for widespread destruction had been avoided.
“Early indications are that the losses from the storm are between $10B and $20B. That's not enough to move the market,” said Danielle Lombardo, chair of the real estate, hospitality and leisure divisions of multinational insurance provider Willis Towers Watson.
Helene crashed into the Big Bend, which stretches east from Tallahassee to just above the Tampa Bay region, with 100-mph winds and up to 20 feet of storm surge. The impact devastated the small coastal and rural towns that dot that part of the state, including Cedar Key.
But the unusually massive storm avoided any direct hits on major cities as it pushed ashore in the Panhandle east of Tallahassee. Still, Helene lashed the Tampa Bay region as it passed by in the Gulf of Mexico, where warm waters fed its growth.
Storm surge inundated properties in St. Petersburg and caused widespread flooding across the region, with some residents along the coast forced to the second floors of their homes to stay dry.
“It’s worse than anything I’ve seen before,” local resident Austin Shaw told the Tampa Bay Times. “The water was up at least 5 feet.”
This morning’s daylight is showing us how catastrophic Helene has been to many of the Tampa Bay beach/bay communities. The surge last night was the highest in over a hundred years. The result: flooded homes/cars, damaged properties, boats washed ashore, & sand filled streets.… pic.twitter.com/5AfyVXOl7y
— Bryan Bennett (@weatherbryan) September 27, 2024
City services are slowly coming back online, with the many bridges that connect the region slowly reopening Friday. A wastewater plant in St. Petersburg remained offline after it was preemptively shut down during what officials described as an unprecedented 7 feet of storm surge.
But Patty Nooney, who oversees Avison Young’s property management operation in Florida, sounded optimistic Friday morning, convinced that the damage could have been much worse.
“Our properties in the Tampa area have come through very well, but we did have some that — because of where they were located — we had to do the sandbags, and I would say we lost power for a short period of time at some of the buildings,” she said.
Farther up the coast and inland, Nooney was grappling with roof leaks in Gainesville and minor flooding in Jacksonville, but all of her properties had reopened by Friday afternoon.
“Even some of the areas that we had anticipated, like the Gainesville-Ocala area, came through much better than we thought they would when we were listening to things last night,” she said.
Nooney doesn’t oversee any properties in Tallahassee, the closest city to where Helene made landfall, but even there, officials were breathing a sigh of relief Friday morning, saying that the city had largely been spared.
Six states have declared states of emergency, and mandatory evacuation orders stretch from Florida to North Carolina. More than 3.2 million people were without power Friday afternoon, with some not expected to see it returned until Sunday at the earliest.
Helene continued to push its way inland after passing over Atlanta early Friday morning as a tropical storm and heading toward Nashville. Isolated flooding has been reported across Atlanta, which received more than a foot of rain, the most on record.
More than 150,000 Georgia residents were without power midday Friday, by which time the storm had passed over the region.
As soon as it was safe to do so, campus crews were hard at work this morning assessing damage, clearing trees and removing other debris around the main Athens campus that fell as a result of Hurricane Helene. We are pleased to report that there was no significant damage to any… pic.twitter.com/CRlFsFk8rg
— UGA (@universityofga) September 27, 2024
But in Asheville, North Carolina, some residents are facing mandatory evacuation orders as heavy rains threaten to trigger dangerous landslides. Locals described a scene of “complete pandemonium,” CNN reported, amid a 1,000-year flood that has swept across the mountainous city.
Still, Fred Karlinsky, the chair of Greenberg Traurig’s global insurance practice group, said the storm could have been far more devastating, even as he expressed his sympathy for the thousands who have been impacted.
“Florida, the insurance industry and the citizens of the state of Florida have dodged a bullet,” Karlinsky said. “I don't want to minimize what the people that are affected are going through here, but it could have been a lot worse for a lot more people.”
Karlinsky agreed with Lombardo that the estimated losses from the storm were unlikely to exceed what the insurance industry had budgeted for claims this year, and he said Helene’s impacts were unlikely to have a large effect on near-term premiums.
Moody’s estimated that 161,849 commercial buildings with an estimated value of $426B were in the path of the storm. While it made landfall as a Category 4 hurricane with wind speeds reaching 140 mph, Helene began its push into the U.S. over a relatively rural part of the state.
If one of Florida’s major cities was in the direct path of the storm, insurance experts said the impacts would have been devastating to the city and the insurance market.
“It would have been catastrophic,” Karlinsky said. “A big storm like this going through Tampa would have been something that is definitely not fully baked into the system. It would have caused a shock for the system.”
Helene could help accelerate a shift in how insurers and reinsurers model the risk being spread across their portfolios.
Extreme weather events are happening with greater frequency across a broader swath of the country, putting pressure on insurers whose business models revolve around bundling high-risk policies with coverage from areas where environmental damage is less likely.
There are simply fewer places today that don’t face some risk from hurricanes, tornadoes, wildfires, winter storms or other natural disasters.
“It's not just the coastal areas, Florida and coastal Texas, Louisiana, California,” Lombardo said, pointing to a report from the nonprofit Rebuild by Design that found that 90% of U.S. counties experienced a severe weather disaster between 2011 and 2021.
“It's getting much harder to spread the risk, because the risk is everywhere,” she said.
Private insurers are backing away from the riskiest regions, especially for residential coverage, said Evelyn Ocas Salazar, assistant vice president for financial institutions at Moody’s Ratings. There is a growing chorus of voices calling for reform across the industry to help bring them back into the fold.
Lombardo and others are pushing lenders to become comfortable with lower levels of coverage and asking sponsors to take on more risk in exchange for lower premiums.
Lombardo said Fannie Mae and Freddie Mac are negotiating and approving insurance waivers, effectively allowing sponsors to carry less coverage than the federally backed mortgage providers typically allow.
Ocas Salazar said she is seeing more deals being structured to shift risk to the sponsor, but she isn't sure that the strategy will survive in the long term. The need to cut insurance costs is being driven not only by rising premiums but also by high borrowing and construction costs. In some cases, it is the only way a deal makes financial sense.
“There's some adaptation, they're adapting to the situation for now,” she said. “I wouldn't say that that's a shift that we're going to see in the long term.”
