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Florida Lawmakers to Tackle Ballooning Property-Insurance Crisis

Special session of the state legislature looks to rein in costs for Florida homeowners


Florida’s private-sector insurers have been plagued by rising reinsurance costs, a highly litigious environment and hurricanes.


By Leslie Scism, Arian Campo-Flores and Deborah Acosta

Dec. 11, 2022 9:00 am ET


Florida lawmakers are set to begin a special legislative session Monday to address the state’s deepening property-insurance crisis, which is raising premiums for homeowners, driving some carriers to insolvency and threatening to stifle the housing market.


Among the issues the Republican-led legislature plans to address are a highly litigious environment in Florida, the availability of reinsurance—backup coverage insurers buy—and the ballooning size of the state’s insurer of last resort, according to a proposed bill released late Friday.


It is the second special session on the issue called this year by Republican Gov. Ron DeSantis, who is considered a potential 2024 presidential contender and could face blowback if the crisis doesn’t abate. A collapse of the home-insurance market could spill into the residential real-estate market, insurance executives and regulators say.


“If we don’t do this right, Floridians will leave the state,” said Republican state Rep. Bob Rommel, chairman of the House commerce committee and part of the team drafting legislation. “Our entire economy is riding on this.”


Many of the state’s smaller, private-sector insurers have been losing money for years, beset by rising reinsurance costs, litigation expenses and hurricanes including Ian, which struck Florida’s southwest coast in September. Risk modelers estimate Ian will cost insurers $40 billion to $70 billion.


The state is heavily dependent on relatively small, Florida-focused carriers, in the wake of retreats by national carriers many years ago. Six of these have been declared insolvent since February, as well as a Louisiana-based carrier that wrote policies in Florida, according to a Dec. 8 report by A.M. Best, which rates insurers.


Reinsurers say they have been increasing prices because of growing catastrophe losses worldwide and worries about more-intense natural disasters. In Florida, they say they also are concerned about litigation costs. Some have reduced their business in the state.

This past summer, Florida-focused home insurers went through their annual reinsurance renewals with prices going up 25% to 30% in many instances, according to ratings firm Demotech Inc. Some carriers were unable to get as much reinsurance as they wanted.


Barry Gilway, chief executive of Citizens Property Insurance Corp., the state-run insurer of last resort, said his team is hearing that reinsurance pricing will be up 30% to 70% for Florida insurers in 2023, with capacity scarcer.


“It could be astronomically expensive,” he said.


Florida’s average annual home-insurance premium of $4,231 is the highest in the nation, and nearly triple the nationwide average, according to projections by trade group Insurance Information Institute.


Florida Gov. Ron DeSantis is calling a special legislative session for the second time this year to deal with surging property-insurance costs.


David Altmaier, Florida’s insurance commissioner, told a recent state Chamber of Commerce conference focused on insurance issues that his office continues to approve actuarially sound “30%-plus rate increases.” With insolvencies already occurring, “we cannot have an underpriced insurance market,” he said.


Lawmakers say a priority in the special session is to rein in litigation, which they say is driven by attorneys aggressively suing carriers, including over minor policy disputes. Florida has just under 10% of U.S. homeowners insurance claims, yet nearly 80% of the nation’s homeowners insurance lawsuits, according to the state’s Office of Insurance Regulation.


Amy Boggs, property-insurance section chair for the Florida Justice Association, which represents trial lawyers, criticized the call for more litigation reform. “Litigation isn’t the problem—it’s the scapegoat,” she said. “What we don’t need is more legislation that erodes the rights of policyholders in an attempt to bail out the industry on the backs of Florida consumers.”


Theodore Tate, a 42-year-old police officer who owns a 2,900-square-foot home in Palmetto Bay, south of Miami, said his insurer tried to drop him earlier this year, even though he had never filed a claim. After his broker intervened, the carrier said it would continue to insure the home with a premium of more than $11,000, up from about $4,500.


Mr. Tate already was picking up extra shifts at work to cover rising costs. His insurance broker eventually found two carriers that together are covering his home for about $5,500.


“You feel betrayed when they drop you out of nowhere,” Mr. Tate said.

Low- and middle-income homeowners are the hardest hit, real-estate agents say. Home buyers already are contending with mortgage interest rates that have roughly doubled this year.


Susie Fernandes, a real-estate broker in Fort Lauderdale, said some clients no longer are qualifying for homes they thought were within budget, after factoring in higher insurance premiums. “People are downsizing,” she said. “It’s become an affordability crisis.”


Lawmakers also are concerned about the rapid growth of Citizens, the last-resort insurer. Citizens expects to end 2022 with about 1.2 million policyholders and its projections show 1.7 million policyholders next year, up from about 440,000 in 2019, Mr. Gilway said. With that growth, Citizens’ risk exposure would jump to $650 billion in 2023.

While Citizens is appropriately funded now, the concern is that uncontrolled growth would outrun its resources in the next few years, and, should a major hurricane hit, lead to assessments on its policyholders and many private-sector policyholders across the state. Officials call these assessment powers the state’s “hurricane tax.”


Mr. Gilway said he is “highly optimistic that, should the bill pass in the proposed format, it will attract more capital to the market and eventually improve the reinsurance picture.” He described it as historic by taking head on the longstanding issues.


In the proposed state House legislation, lawmakers tackle excessive litigation by eliminating so-called one-way attorney fees—a provision of Florida law that insurers say encourages plaintiffs’ lawyers to sue to obtain large fee awards. The bill also prohibits “assignment of benefits,” under which homeowners give third parties, such as roofing contractors, the right to seek payment directly from their insurer.


The proposal aims to strengthen state regulation of property insurers. And it calls for an additional $1 billion for the 2023 hurricane season in a state-reinsurance program, to ease the anticipated private-sector shortages.


“The governor expects the legislature to rein in the costs of excessive litigation and ensure the property-insurance market in Florida is both attractive to insurers and more competitive for consumers,” said Bryan Griffin, press secretary for Mr. DeSantis.


Write to Leslie Scism at leslie.scism@wsj.com, Arian Campo-Flores at arian.campo-flores@dowjones.com and Deborah Acosta at deborah.acosta@wsj.com


Appeared in the December 12, 2022, print edition as 'Florida Insurance Woes Come to Head'.

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