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The Florida homeowners’ insurance market: Another tempestuous year

By Klayton Southwood and Trevar Withers | July 27, 2022

Carrier insolvencies and others that have pulled back from writing policies illustrate how exacting the Florida homeowners’ insurance market remains and the potential benefits of a data-driven approach.
Casualty|Insurance Consulting and Technology|Property Risk and Insurance Solutions

Around this time last year, we wrote a short article about the difficulties faced by homeowners’ insurance carriers writing business in Florida and some of the legislative changes that had been introduced in an effort to tackle them. One year on and the challenges for the Florida insurers continue due to:

The steady upward trend of household numbers and property values in the state over recent decades. By 2020, put the total estimated value of residential property in Florida at over $3 trillion.

The rising frequency and cost of hurricanes. The damage costs of the past six Atlantic hurricane seasons (2016-2021) are all on the top 10 all-time list. And the National Oceanic and Atmospheric Administration (NOAA) predicts an above-normal 2022 season.

Unchecked litigation trends. Curbs placed on claims and lawsuits, particularly with regard to the assignment of benefits, by Florida House Bill 7065 and Senate Bill 76, have not slowed the propensity to sue. According to the National Association of Insurance Commissioners, 79% of U.S. national lawsuits opened against household insurers in 2020 originated in Florida despite the state’s overall percentage of claims being just 8%.

Litigation was the greatest concern and priority of over three quarters of carriers, according to the American Association of Insurance Services’ 2022 Florida Insurance Market Survey. And the Insurance Information Institute reported that lawsuit activity during the early months of 2022 continued on a steady upward path seemingly unaffected by HB 7065 and SB 76.

Reluctance to raise prices in line with claim costs. Many insurers still shy away from the rate hearings required for large rate increases and the associated negative publicity despite combined ratios that in many cases far exceed 100%.

Reinsurance availability decreases. The stresses on the primary market have spread into the reinsurance market, meaning that some reinsurers increased rates significantly and restricted coverage offered. Many of Florida homeowners’ reinsurance programs renew on June 1, and some primary carriers have found themselves without reinsurance entering a storm season that, according to Colorado State University hurricane researchers, is forecast to yield 19 named storms and nine hurricanes, of which four could be major. One example is Southern Fidelity, which had its Demotech rating withdrawn and went into liquidation as a result of an inability to secure reinsurance.

Market implications

The impact of these factors is clear.

Insolvencies among smaller and midsize insurers have grown. Meanwhile, active carriers are running in the red and continue to grapple with pricing, underwriting and product terms that will help them meet at least some of their objectives.

On the customer side, the numbers of households unable to access private insurance has increased rapidly. As of early July 2022, Citizens Property Insurance Corporation (CPIC), which was established as an insurance backstop by the Florida legislature in 2002, had over 937,000 policies in force (up 47% from June 30, 2021), and is expected to reach 1.2 million by year-end based on the number of new customers joining the program.

Seeking additional solutions – special legislative session

Clearly, the steps taken to right the market to date haven’t been sufficient.

When the 2022 regular legislative session ended in March without property insurance reform (after Senate Bill 1728 failed to pass in the State House of Representatives), Florida Governor Ron DeSantis announced a special legislative session in May, noting Florida’s disproportionate property insurance litigation, recent insurer insolvencies and growth in CPIC. The session’s scope was to include property insurance, reinsurance, changes to the Florida Building Code to improve affordability of insurance, the functioning of the Office of Insurance Regulation (OIR), civil remedies and appropriation.

As a result of the session, Governor DeSantis signed two new pieces of legislation (Senate Bills 2-D and 4-D) into law. Senate Bill 4-D is mostly related to building safety. Key provisions in Senate Bill 2-D include:

  • An option for carriers to access a $2 billion state-backed reinsurance program in return for offering policyholder savings
  • Limits to the degree to which insurers are expected to cover the cost of full roof replacement aligned to specific new customer protection measures
  • Restrictions on contractor solicitation of homeowners regarding making an insurance claim for roof damage
  • Changes to legal rights and remedies that address potential insurance fraud and abuse
  • Establishment of a new unit within the OIR related to carrier solvency and a requirement for the OIR to make more information about property insurers within the state publicly available
  • Enlarged requirements for insurers to provide information to policyholders about claim valuations, settlements and reasons for non-payment
  • Creation of a $150 million fund to support homeowners’ storm damage mitigation efforts

Similar to the case of Senate Bill 76, however, opponents to some of the reforms were quick to file suit. In this case, Air Quality Assessors and the Restoration Association of Florida filed a complaint in Leon County Circuit Court charging that the denial of their right to seek attorney fees under an assignment of benefits arrangement is unconstitutional.

What to do in the meantime?

The reforms from the special legislative session, taken at face value, should help address some of the ongoing pressures on carriers operating in the Florida homeowners’ insurance market.

They will, of course, take time to flow through carriers’ operations and claim universe, similar to claim and litigation experience following Florida House Bill 7065 and Senate Bill 76. Furthermore, past experience suggests the impact of the reforms will be diminished by legal challenges and other efforts to circumvent new rules.

Questions remain about what carriers can do in the shorter term to alleviate the pressure on the bottom line and on, ultimately, their ability to trade — aside from some of the more drastic options of totally or partially turning their backs on the market or risking unpopular and uncompetitive premium increases.

There are no easy answers.

Insureds will need to continue to review terms and exclusions judiciously as the market develops in response to the evolving legislative environment.  These will, however, by their nature remain relatively blunt measures.

Some carriers have managed to have better results than others and we believe improvements are achievable by employing sophisticated data and analytics. By using as wide a range of data indicators and claim experience data as possible to identify and foresee warning flags and opportunities, carriers should be better able to fine tune pricing, underwriting and reserving, and navigate the choppy waters of the Florida homeowners’ market.


Senior Director – Insurance Consulting and Technology

Director – Insurance Consulting and Technology
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