Florida Citizens CEO Gilway puts hurricane Ian best-estimate at $40bn

Barry Gilway, the CEO of Florida’s property insurer of last resort Citizens Property Insurance Corporation, told analysts at KBW that his current best-estimate for the insurance industry loss from hurricane Ian is just $40 billion.

KBW’s analyst team hosted Gilway to discuss the impact of hurricane Ian on Florida’s already challenged property insurance market this week.

Gilway said that hurricane Ian’s industry loss would be expected to fall closer to the lower-end of industry estimates, which KBW’s analyst team highlights range from as low as $31 billion to as high as $74 billion.

But the best-estimate from the Florida Citizens CEO is $40 billion.

Increasingly, there seems some disparity in industry loss expectations after hurricane Ian, with many carriers in Florida feeling the market-wide loss to insurance and reinsurance capital will not go as high as some of the risk modellers suggest.

KBW’s analysts are also uncertain, but said, “We suspect that Florida’s highly litigious environment will probably drive losses higher – possibly much higher – over time.”

While there is a disparity of views over the quantum of losses, part of that comes down to the wind vs water question, with storm surge damage set to be such a large component of coastal losses.

As well as wind vs water, there is the concern that some surge losses will likely end up in litigation, where the policy explicitly excluded flood risks, with the one-way attorney fees of the Florida legal system again set to play a role.

Add to that the reports of fraudulent roofers and repairmen in local press and it’s clear the loss adjustment expenses (LAE) and litigation burden is likely to be high with hurricane Ian. How high is the question?

Florida Citizens own estimate of claims from hurricane Ian has currently been pegged at between $2.3 billion and $2.6 billion.

But KBW’s analysts explained that this only contemplates current levels of litigation activity and that Gilway expects litigation to increase over time.

As we also explained, based on average claims costs Florida Citizens has faced with other hurricanes, such as Irma, the data suggests the ultimate cost to the insurer of last resort could be far higher.

So, there’s a lot of uncertainty still, but Gilway’s low industry loss estimate perhaps suggests a confidence in him that Citizens claims bill won’t be as significant as the data might suggest.

Read all of our coverage of hurricane Ian, and our analysis on the potential market losses, here.