As it churns toward the disaster-prone Sunshine State, Hurricane Idalia could be a litmus test for Florida’s increasingly volatile and expensive insurance landscape. Despite several insurance companies exiting Florida, experts say the state’s residents are still mostly covered this hurricane season. But insurers are keeping a wary eye on Idalia, expected to make landfall Wednesday. Experts say the state’s insurance industry can absorb potential losses for now, but an Idalia hit on a highly populated area could affect those companies’ future outlooks. Conditions could change ahead of Wednesday, including the strength and path of the storm. “This would be a very different event if it was going right into Tampa versus much less populated areas,” said Matthew Carletti, an analyst at JMP Securities. “There should be much less loss where it’s headed now, but that could change. Tampa is on the edge of the cone, but (the storm) could still end up there, and that will have a big impact of ultimate loss. It’s still very early in that regard.” The storm is strengthening quickly and is projected to intensify into a powerful Category 3 hurricane. It is on a path to hit less-populated areas on Florida’s Gulf Coast, making landfall well north of Tampa, but a small shift in the track could put the metro area of about 3 million people at risk. It will likely pass over Gainesville and Jacksonville — Florida’s most populous city — after it makes landfall. All three cities could see maximum sustained winds in excess of 50 mph and up to six inches of rain, CNN estimates. That’s slightly weaker than Hurricane Ian, which made landfall in September 2022 as a major Category 4 storm with sustained winds of around 150 mph. Hurricane Ian caused about up to $65 billion in insured losses, according to reinsurance company Swiss Re. Ian was the most expensive storm ever to hit the state, including $17 billion in uninsured losses. “If a hurricane strikes a major metro area as opposed to a rural area…it would have a greater impact on losses and properties that are impacted, certainly,” said Mark Friedlander, a spokesperson for the Insurance Information Institute. “Florida’s property insurance market remains very volatile, but the insurance industry is well-capitalized to pay Idalia claims,” he added. “One of the biggest reasons is insurers have been able to obtain adequate reinsurance policies this year.” The cost to the consumer, however, will likely be higher insurance premiums. One of the biggest reasons insurance companies are in a good financial position to pay claims this year, according to the Insurance Information Institute, is because insurers have been able to obtain satisfactory policies from reinsurance companies, which insurance firms use to cover some of their risks. But these reinsurance companies are raising their premiums. “The average cost of reinsurance increased 40-70% this hurricane season. That means (insurance companies) will have to pass along those costs along to customers in the form of higher premium rates,” said Friedlander. Florida residents are already spending an average of $6,000 dollars on home insurance policies, according to III, four times more than the average in other states. While those potential increases won’t impact most homeowners this hurricane season, the trickle-down effect will become more evident as policy renewals roll around. Homeowners will also not be affected by some of the recent insurance company withdrawals from Florida. For example, Farmers Insurance announced last month that it will voluntarily withdraw from the state, affecting about 100,000 customers. But the non-renewal program will not go into effect until the first quarter of 2024, and even then will be gradually implemented over a year based on policyholders’ renewal dates. “No Farmers customer has lost their coverage for hurricane season this year,” said Friedlander. According to III, 85% of Florida residents have home insurance, which covers wind damage. Flood insurance is purchased through a different policy, mostly through the Federal Emergency Management Agency. Enrollment in flood insurance has seen a steady uptick every month since October 2022, according to the latest FEMA data. As of July 31, there were an additional 44,000 active flood insurance policies in Florida than there were last August, before Hurricane Ian hit the state. While Florida has the highest flood insurance enrollment rate of any state, Friedlander said only 18% have flood insurance through either federal or private insurers.