Florida property insurance market’s ‘staggering losses’ are ‘not sustainable’

By John Haughey
The Center Square
October 15, 2021

Many Florida property insurers are seeking double-digit rate hikes citing ballooning reinsurance costs, “loss creep” from 2017-18 hurricanes, coastal flooding and litigation.

Florida lawmakers have attempted to slow the surges with their 2019 adoption of an “assignment of benefits” reform bill and this year’s approval of Senate Bill 76, which slashes time to file claims from three years to two, reduces attorney “multiplier fees” and allows insurers to cover only the depreciated rather than the full value of replacing roofs more than 10-years-old.

While those laws primarily focus on trimming fraud and litigation, they do little to address the state’s ailing property insurance market, dominated by thinly capitalized independents since major corporate insurers abandoned the state in the early 2000s.

House Minority Co-leader Evan Jenne, D-Dania Beach, wonders if lawmakers need a new approach in resolving the decades’ old property insurance crisis when they convene their 60-day 2022 legislative session on Jan. 11.

“Should we be moving in a completely different direction?” he asked Wednesday after a presentation by Citizens Property Insurance Corp. President/CEO Barry Gilway before the House Insurance & Banking Subcommittee.

“What we have been trying to do, a lot of it has been built on one another,” Jenne said. “Yet we continuously find the same results and find ourselves in these sticky situations. Should we be looking at something new?”

Gilway asked lawmakers to address the “sea of red ink” that contributes to sustained net-income losses posted by dozens of Florida private insurers, attributing much of it to reinsurance costs, essentially insurance for insurers bankrolled by catastrophic fund markets.

Gilway said the state’s Office of Insurance Regulation (OIR) in 2020 received 105 rate filings from insurers seeking increases above 10%, calling the state’s insurance market “not sustainable.”

“The consistency of loss across the entire marketplace is absolutely staggering,” he said. “It’s not a decision that one or two companies are making. The reality is that what is occurring in the marketplace is impacting every single company in the market.”

Including Citizens, which was created by the Legislature in 2002 to serve as the state-backed “insurer of last resort” for those among Florida’s 6.5 million landowners unable to find property insurance.

In 2012, Citizens’ policy count swelled to 1.5 million with the state backing $10 billion in property insurance policies. A “depopulation” initiative to transfer policies – and liability – to private insurers whittled the count to 419,475 in October 2019.

But when Citizens added nearly 22,000 policies last month, its count rose to 708,919 policies, backing nearly $7 billion in properties, nearly 200,000 more than Sept. 30, 2020. Citizens forecasts enrollment of 1 million to 1.3 million in 2022.

Last month, Citizens Board of Governors unveiled three proposals for the 2022 session designed to reduce its policy count by increasing costs for policyholders. In essence, they allow Citizens to shift policyholders under its program to private insurers if their rates don’t exceed Citizens’ by more the 20%. The subcommittee did not discuss those proposals.

Rep. Tom Fabricio, R-Miramar, said lawmakers should look into opening the insurance market to surplus-lines carriers and Rep. Matt Willhite, D-Wellington, said a disabled veteran constituent told him he may lose his home because he can’t pay his property insurance bill.

“Where’s the breaking point for the disabled military veteran, who is on a fixed income, who can’t insure his home, when they are at a breaking point themselves?” he asked.

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