Christmas Coal: Florida’s Property Insurance Market

With the holidays and new year upon us the news from Florida’s property insurance market is akin to Santa putting coal in your stocking at Christmas. In what seems a never ending evolution of Florida’s ever so volatile property insurance market since 1992’s Hurricane Andrew visited our shores comes an excellent, all be it unpleasant, overview of what’s happening and what might happen in 2021 from the Tampa Bay Times.

Our professional agents and underwriters, of course, deal with the issues you are going to read about within the article on a daily basis and I’d say we deal with those issues as well or better than anyone I know. That said, the issues are real and they are impacting consumers all over the state and especially so here in our little slice of paradise known as South Florida.

And those issues are finally, hopefully, starting to get attention that, just maybe, might lead to some solutions in the New Year. Consider what had to say about what’s happening in the property insurance market right now:

“What’s going on in the (Florida) insurance world is what I would liken to an uncontained nuclear disaster,” . State legislators “are just letting the fallout grow and not acknowledging what’s truly going on.”
Florida Senator Jeff Brandes of St. Petersburg

Whether you purchase home or condo coverage or business property protection the Time’s article is a good update on the challenges that are predicted to continue through the coming year and thus worth the read (the bold is mine).

FLORIDA PROPERTY INSURERS MAY CONTINUE FACING INSTABILITY THROUGH 2021

Publication Date: 12/23/2020
Source: Tampa Bay Times (FL)

Florida’s property insurance market was rattled this year as insurers faced financial pressure on a number of fronts.

Rates spiked by double digits to help pay for rising reinsurance costs. Storm claims lingering from two years-old hurricanes continue to put a drag on insurers’ finances. And that’s compounded by a continued high volume of litigation over claims that aren’t related to storms.

And while the tumultuous year is coming to a close, sustainable relief likely is far off.

There’s no quick fix here,” said Mark Friedlander, Florida representative for the nonpartisan Insurance Information Institute. “The Florida property market will remain unstable throughout 2021.”

The year’s unusual string of strife comes from a confluence of long-term issues that have come to a head this year. Reinsurance, coverage that insurers purchase to help with claims paying, rose because of a market shift. Whereas insurers previously bought this coverage through insurance-linked securities, those funds are less common now, leaving private reinsurers with more market share. They took losses by keeping prices low for years to compete with the securities and are raising prices now to gain some of that back.

Insurers are also still paying for Hurricanes Michael and Irma. In Florida, policyholders have three years to file a claim related to a named storm. Many get filed just before the cutoff. While Hurricane Irma’s claim period is no longer open, insurers will need to continue accepting Hurricane Michael claims until late next year.

And then there are the lawsuits.

For nearly 10 years, insurers have complained that Florida law encourages fraudulent or excessive claims related to damage to homes not caused by storms. Legislation last year sought to curb that, but new iterations that work around the law are springing up, often around replacing aging roofs.

A portion of the issue comes from the fees that lawyers are paid in the process. Florida allows lawyers to request a “contingency fee multiplier,” which can increase the amount they are paid if their standard fee is lower than what would be reasonable for the case. This makes the outcomes more expensive for insurers, which translates to higher rates for ratepayers.

State Sen. Jeff Brandes, R-St. Petersburg, has re-introduced a bill for the upcoming session that would require judges to grant this “multiplier” only in rare circumstances.

The issues in the private market are also putting pressure on the state’s safety net “insurer of last resort,” state-run Citizens Property Insurance Co., which faces many of these same challenges.

Citizens in mid-December pushed its rate filing to January to give it time to talk with the Florida Office of Insurance Regulation about raising its rates. Its proposed average rate increase for homeowners insurance would be 3.71 percent. Citizens provides subsidized rates for many of its customers, which makes its rates significantly lower than those offered by the private market.

This makes it difficult for the insurer to offload policies to private insurers. Currently, Citizens is adding about 3,000 policies per week, totaling about 537,000 policies as of December. Its highest policy count was in 2011 when it had 23 percent of the market with 1.4 million policies.

Last year, Brandes asked Citizens’ CEO Barry Gilway to find a way to make the insurer a residual carrier once again. A Florida State University study that Citizens commissioned concluded that the insurer will not be able to meaningfully send policies back to the private market unless that market is healthy.

Some solutions to this may come during the next legislative session. Brandes said he is planning a large insurance reform bill with Sens. Doug Broxson, R-Gulf Breeze, and Jim Boyd, R-Bradenton, intended to increase options for coverage for Floridians “in order to match their policies to their pocketbook.”

“What’s going on in the (Florida) insurance world is what I would liken to an uncontained nuclear disaster,” Brandes said. State legislators “are just letting the fallout grow and not acknowledging what’s truly going on.”

And as this unprecedented year of 2020 nears an end allow me to thank you for allowing the entire team of professionals here at Morris & Reynolds to help you.

We ‘celebrated’ our 70th year this year by locking our front doors, wearing masks in the office, walking past a digital robot type device that measured our temperatures while reminding us to put our masks on when we forgot as well as staying six or more feet from one another, mobilizing a seven-decade old business into a digital one so that our team could work remotely whenever needed, having the place ‘deep cleaned’ on Sundays and on and on but mainly we celebrated this milestone by advocating for you, our loyal client.

For that honor, as always, thank you.

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