Who pays the insurance payouts for Helene and Milton damage?

Twenty-six feet of water surged through the building holding the Village Potters art collective in Asheville, North Carolina, during Hurricane Helene.

“It flooded all the way up to the second floor — 37 wheels, 17 kilns, tables, slab rollers, I mean it’s, it’s astronomical,” said Sarah Wells Rolland, who helped found The Village Potters with her husband in 2011.

Eighty to 100 students took classes there each week. Potters from around the country would visit to take workshops or do residencies.  Others would find mentorship there — “we help them organize their plans and their business plan and how to become a professional potter, and then we just support them and dream with them.”

The only traces remaining are the 16-inch-thick concrete walls of the building, and piles of debris. 

The greatest silver lining has been the outpouring of help from neighbors, friends, and strangers.

“So many people showed up to help us, and we put on mud boots and gloves, and we mucked out the pots and wheels and kilns, and a friend of ours over here where we live, loaned us, without any charge, his apple barn,” Wells Rolland recalled. The barn is where her husband and volunteers have been repairing mud-caked motors and salvaging what they can.

The second greatest silver lining might just be the insurance Wells Rolland was required to get as a condition for renting.   

“We lost about $500,000 worth of equipment and it’s $166,000,” she said. Not enough, “but it’s sure gonna help.” Wells Rolland has started a GoFundMe and is applying for grants. Her community of artists is searching for a new home.

The total damage wrought by Hurricanes Helene and Milton is estimated to run as high as $100 billion or more. Insurance is expected to cover a substantial fraction of that.  

“For Hurricane Helene, we have put a range of $6 billion to $11 billion and for Hurricane Milton, we’ve put a range of 30 billion dollars to 50 billion dollars,” said Rob Newbold, president of the Extreme Events Solutions team at Verisk, which provides analytics to the insurance industry. 

As huge as these numbers are, analysts say the biggest insurers will probably have no problem covering it.

“There are different types of loss events for the insurance industry,” Newbold explained. “One is a so- called earnings event.”

An “earnings event” is the term in insurance world for a disaster or situation that might reduce an insurance company’s profits, might eat up a lot of the premiums they take in, but is otherwise manageable. Hurricanes Helene and Milton were that for big insurers. It’s possible for smaller insurers though, they were, another kind of disaster.

“A so-called a solvency event,” Newbold said.

That is when the damage is so bad, it affects the insurance company’s actual viability as a business, eating its actual capital. And it is in these situations that insurance companies need insurance themselves.

“Insurance for insurance companies,” is how James Eck describes what’s known as “reinsurance.” Eck is a senior credit officer at Moody’s Ratings. Even FEMA buys reinsurance. It works because reinsurance only kicks in at a certain level of desperation — re-insurers aren’t constantly paying out to insurance companies, and reinsurance firms can spread out their risk by selling policies all over the world.

“So a reinsurer might have property exposure in Florida but it could also have exposure in Japan for earthquakes or typhoons,” Eck said. 

The size of the global reinsurance market was $585 billion dollars in 2023, according to Spherical Insights, and is predicted to grow to $1.3 trillion by 2033. Like for a lot of regular insurance, the premiums for reinsurance have been rising the past few years, in part because of the cost of the damage done by storms and wildfires.

Momentous disasters have added to the pressure. “After 2022 when Hurricane Ian hit Florida, the 2023 reinsurance renewals were particularly challenging for the industry,” said Tim Zawacki, a principal research analyst at S&P Global Market Intelligence.

Reinsurance rates that insurance companies have to pay can go up as much as reinsurers say they need to, but the insurance rates that we pay are often limited by state regulators, which puts some insurance companies in a bind. North Carolina insurance companies recently asked for permission to raise home insurance rates by more than 50%. They probably won’t get all of it, but they’ll get some. 

“Whatever the outcome of that filing happens to be, I think will have a meaningful impact on homeowners in the state,” Zawacki said.

Meanwhile, reinsurance companies have been less and less inclined to cover regular weather, leaving insurance companies to deal with it themselves. So sometimes, insurers will also cover less and less, or they can’t make the math work and then just stop operating in certain places. At least one insurer in North Carolina said it was closing down shop there even before the recent hurricanes.