Florida’s insurance market was already in crisis. Then came Hurricane Ian. Will taxpayers end up on the hook?

Florida’s famously low-lying subtropical peninsula is routinely battered by tropical storms that result in billions of dollars of financial losses that someone — individuals, businesses, insurance companies and governments — has to cover. That bill goes straight to insurance companies, the uninsured and often the federal government.

Who’s insured by FEMA — and who’s still at risk

In the Gulf Coast counties hit by the storm, around 50 percent of homeowners had flood insurance, according to data from the Insurance Information Institute. But, Institute spokesman Mark Friedlander said, this is largely due to being required to buy it because the homes are in especially risky areas where federal mortgage programs require the purchase of flood insurance.

According to Milliman, an insurance consulting firm, 18.5 percent of the homes in Florida counties with an evacuation order carry FEMA flood insurance.

This war chest means that FEMA will likely not have to go to Congress for more funding to pay out claims, R.J. Lehmann, a senior fellow at the International Center for Law and Economics, told Grid. “It is very unlikely Ian will pass $18 billion in claims, which would save NFIP from having to go to Congress,” Lehmann said.

But for the overall market, “the Florida insurance story is that our market was already collapsing,” Lehmann said.

The challenges for everyone besides FEMA

Florida’s unique combination of storm risk and coastal development has made it a difficult place to insure property.

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Who covers what

There will also likely be fights between insurers about what they do and don’t have to cover. While floods are not covered by homeowner’s insurance, plenty of damage from hurricanes — whether from wind ripping off a roof, water damage from rain or sewage, or damage from debris — is.

“The wind carriers will say this is flood; the flood carriers will say this is wind,” said Gina Clausen Lauzier, an insurance lawyer at Berger Singerman in West Palm Beach. “There’s a gap in coverage between flood and wind. Some people may be without coverage.” But beyond any specific dispute between insurers and policyholders or the ability of any one insurance company to stay in business, Florida is a fundamentally risky place to build — and that means someone has to either pay for the risk or forgo building entirely.

“At some point, we will have to bite the bullet,” Lehmann said. “That exposure of Florida as a low-lying peninsula means you have to charge much more than people can afford, and you will need public policy that will involve buying people out and saying ‘You can’t live here anymore.’”