Early forecasts point to a slightly below-average 2026 Atlantic hurricane season, and despite improving market conditions, Florida remains a key focus for the property insurance market, according to a recent Fitch ratings report.
Despite the continued concentration of financial risks, the report also highlights that U.S. property and casualty insurers and reinsurers are well-positioned to absorb losses from large events due to increased capital reserves and structural improvements in market conditions.
Most major forecasting groups say Atlantic hurricane activity in 2026 will be slightly below historical averages.
Before that, the 2025 hurricane season was quiet, with zero hurricanes making landfall along U.S. coastlines.
Baseline meteorological models indicate that current El Niño Southern Oscillation (ENSO) neutral conditions may transition to El Niño in the coming months.
While sea surface temperatures were above normal in the western tropical Atlantic, sea surface temperatures in the eastern and central tropical Atlantic were slightly below historical averages.
Natural disaster losses, especially severe hurricane-related events, are a major source of loss volatility for property and casualty insurance companies. Analysts stress, however, that final insured losses depend more on where a storm makes landfall and its specific intensity than on the number of seasonal storms.
Fitch Ratings noted that the capital strength of reinsurers/insurers provides a substantial buffer to absorb large short-term insured losses from individual hurricanes or other catastrophic events.
However, ratings agencies have warned that a rapid confluence of multiple large events in the short term could lead to capital reductions and rating pressures across the industry.
Reinsurance demand is expanding ahead of mid-year renewals, driven by growth in structural risks, rising insured property values, the country’s ongoing population reduction efforts and the formation of private insurers.
Additionally, the shift in Florida Hurricane Catastrophic Fund (FHCF) attachment points has accelerated the need for protection below the standard FHCF layer.
As a result, Florida insurers are expected to seek an additional $5 billion to $7 billion in reinsurance by mid-year, focusing on protecting these lower additional thresholds, Fitch analysts said.
Comprehensive legislative reform, increased private market capacity and improved reinsurance conditions have strengthened Florida’s property insurance market since 2023.
One clear indicator of this stabilizing trend is the downsizing of Florida’s government-sponsored insurer of last resort, Citizens Property Insurance Company, the report explains.
Data shows that the citizenship policy will peak at about 1.4 million in 2023. When comparable coverage became available, commercial residential policies returned to the private market, with the number of Citizen policies in effect falling to approximately 295,000 by April 2026.
Further declines are likely to be more gradual as takeout opportunities become more limited. Fitch stresses that the ultimate durability of these legislative and structural reforms remains to be fully tested through a truly severe, high-intensity hurricane season.
Additionally, smaller, Florida-only insurers may remain particularly vulnerable in major disaster years because their capital positions are generally weaker relative to their larger national peers.
Heading into the June-July 2026 reinsurance renewal period, market conditions appear to be favorable for Florida cedants, supported by expanding capacity in the traditional and ILS markets, including strong cat bond issuance and broader third-party capital.
Overall, improving market conditions and strong industry capitalization put insurers in a stronger position heading into the 2026 season, although loss outcomes will still depend on storm landfall and severity.
