Tropical Storm Ian set to cost $40 billion in Florida home insurance claims

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Tropical Storm Ian set to cost $40 billion in Florida home insurance claims

Tropical Storm Ian is poised to become one of the most expensive weather catastrophes in the U.S. insurance history.

The Insurance Information Institute spokeswoman Loretta Worters told FOX Business that it was too early to tell what the damage projections will be, but many insurance modelers are putting it between $20 and $40 billion.

Hurricane Charley followed a similar path through Florida as Ian in 2004 and racked up $16 billion in property damage.

The costliest storm has been Hurricane Katrina. There have been no direct hits in Florida over the past three hurricane seasons — until Ian.

Ian's arrival in Florida comes after the Sunshine State has seen a lot of problems with its insurance market due to a number of lawsuits and fraudulent roof-replacement schemes.

79% of all homeowners insurance lawsuits are filed in Florida, according to the National Association of Insurance Commissioners. Florida homeowners receive only 9% of the U.S. homeowners property insurance claims. Floridians For Lawsuit Reform estimates that 130,000 property claim lawsuits will be filed in the year 2022 due to Florida's favorable litigation environment.

The Insurance Information Institute found that Florida homeowners pay the highest average property insurance premium in the U.S. at $4,231, nearly three times more than the U.S. average of $1,544. In both 2020 and 2021, the net underwriting losses for Florida domestic property companies exceeded $1 billion, leading to insurer insolvencies and rating downgrades.

Worters says the state's insurers have had to respond to the market trends by limiting new business, ending renewals on existing policies and even cancelling policies midterm.

Citizens Property Insurance Group, the state-backed last resort in Florida, has seen a surge in policyholders. The firm expects to have a policy count of 1.1 million to 1.3 million by the end of 2022, as it takes on more than 5,000 policies a week.

The Office of Insurance Regulation of Florida has issued an emergency order that prohibits the cancellation or non-renewal of a policy until Nov. 28.

Standard home insurance policies – including those with Citizens – do not include flood coverage, which is handled through FEMA's National Flood Insurance Program and is separate from the insurance market.

Flood insurance is usually mandated for mortgaged homes in flood zones, but people who fully own their homes sometimes don't get it, and it is less common in areas that are not usually prone to flooding.

According to the National Weather Service, Ian is expected to regain hurricane status on Thursday and make landfall in South Carolina Friday.