The property insurance market in Florida has been in an almost constant state of crisis for the past 30 years, and recent developments show that it is well past time for our governor to call a special session of the legislature and for legislators to honestly evaluate the causes of this crisis and develop solutions for them.
Here are a few disturbing facts:
n Property insurance costs have more than doubled since 2019 and are currently nearly three times the national average.
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n CBS News reports that the cost is expected to increase as much as 40 percent this year.
n About 14 companies have gone into receivership or been liquidated.
n At least 10 companies have departed Florida.
The exodus to insurers started with Hurricane Andrew, a category five hurricane that struck south Florida in 1992 and was the most destructive to ever hit Florida in terms of structures damaged or destroyed.
The impact on the insurance industry was devastating. According to the Insurance Information Institute, at least 16 insurance companies became insolvent because of their losses from Andrew, and many others fled the Florida home insurance market.
One direct result of the storm was a call for stronger building codes and more stringent building inspector training, as well as the creation of two home insurance pools that later merged to form the Citizens Property Insurance Corporation, a government entity to provide property insurance to Florida property owners unable to find insurance coverage in the private market.
Another impact was creation of multiple Florida-only insurers, including Florida-only subsidiaries of major insurers.
Unfortunately, many of these companies did not have adequate capitalization and were only one major hurricane away from insolvency, As a result, they have relied increasingly on reinsurance, which is essentially insurance bought by an insurance company from another insurer or more commonly from a consortium of national and international financiers.
As losses for some companies have mounted, the cost of reinsurance has escalated. Also, litigation costs for Florida insurance companies have soared in recent years. A recent evaluation showed that while Florida has only 9 percent of the insurance claims in the country, 79 percent of the claims lawsuits are in Florida.
These litigation costs, coupled with losses from major storms, have led to continuing instability in the property insurance market and companies losing money in this market.
Since 2019, the legislature has passed three bills aimed at restoring stability to the property insurance market. These deal primarily with litigation issues, particularly those involving roofing claims and the assignment of benefits.
But these have not resolved the underlying issues and restored stability to the market, as evidenced by the departure of Farmers Insurance and the decision by AAA to pull out of some Florida markets and limit its exposure.
With a hurricane season looming and continuing concerns about whether property insurance will be available and at what cost, the time has come for another special session of the legislature, and one that will deal with the causes of instability and restore stability to the troubled market.
The legislature cannot predict or control storms that will hit the state, but it can make laws that determine the rules under which property insurance companies provide insurance coverage to Florida homeowners.
