Fla. Insurance crisis deepens as prices rise, companies collapse

Long known as the most hurricane-prone state, Florida has reached a new level where hurricane fears are increasing and real estate prices are threatening.

Florida has the worst property-insurance market.

Four Florida insurance companies have declared bankruptcy since April, and others are canceling or not renewing policies. Hundreds of thousands of people have been forced to buy property insurance through the state’s last insurance company, Citizens Property Insurance Corp.

“Every day, there’s another company that looks like it won’t be able to pay,” said Chief Citizens Officer Barry Gilway at a recent public meeting.

The number of Citizen policies recently passed 1 million for the first time since the beginning of 2014 and could reach almost 2 million by the end of 2023, according to a plan of Citizens.

Two years ago, the Citizens took out insurance 510,000 Florida properties.

Gilway called the policy growth “incomprehensible.”

Floridians currently have the highest insurance rates in the country, according to the industry-funded Insurance Information Institute. The average price is $4,231 – nearly three times the US average of $1,544.

“It’s gotten to a point where Floridians can’t afford to buy their homes,” said Institute spokesman Mark Friedlander. “This will eventually lead to a boom in the real estate market and lower property prices.”

At the same time, from October through June, nearly 160,000 Floridians canceled the flood insurance they purchased from the Federal Emergency Management Agency as the cost increased on some homeowners. Flood insurance is different from homeowners insurance.

The instability in the homeowners’ market is the result of a unique mix of factors including high costs against insurers and the exposure of Florida insurance companies to storm damage in neighboring states.

Florida has not had a major hurricane since 2018. But since then, many insurers in Florida have expanded to include properties in Louisiana, which faced tens of billions in losses from the hurricane. Laura in 2020 and Hurricane Ida in 2021. The insurers were wiped out.

In late May, the Florida legislature met in a special session to address the insurance crisis and there are two rules aimed at strengthening the industry’s finances in part by controlling costs arising from lawsuits filed by policymakers the claims are being challenged.

But since then, three Florida insurers have gone bankrupt, affecting 170,000 policies, and others have announced they are leaving Florida – a process that includes not renewing policies after they expire. A fourth insurer, Avatar Property & Casualty Insurance Co., went bankrupt in April.

“The impasse continues because of strong action that hasn’t been taken in the legislature,” Friedlander said.

Kyle Ulrich, president of the Florida Association of Insurance Agents, said the legislature made “meaningful and important reforms” although it will take years for changes to help the insurance industry.

“Impact doesn’t happen overnight,” Ulrich said.

In July, Citizens Insurance added 63,000 new policies — the largest one-month increase since July 2006, when insurers reeled from a series of hurricanes that ravaged Florida in two years. ago.

But more important than the number of Citizens policy is its financial exposure, measured by the total value of the property that is guaranteed.

While the number of Citizens-Insured properties has doubled since September 2020, the value of insured property has nearly tripled to $360 billion from $133 billion, Citizens data shows. bite. Growth is concentrated in the southeastern half of Florida, which has some of the state’s highest real estate.

“One of the major hurricanes that have occurred or a series of hurricanes like Louisiana in the past few years can easily wipe out the savings of Citizens to pay claims,” ​​said Friedlander.

The development raises concerns that Citizens will use its ill-informed administration to impose special assessments on all insurance in the state except for medical and malpractice. pay claims. Citizens can research their own program card holders a fee equal to 45 percent of their expenses.

“I don’t know how many of these millions of credit card holders understand that. They could really get a bill this year,” said University of Florida insurance expert Charles Nyce.

It has only issued one citizen review since its inception in 2002. That happened after five major hurricanes hit Florida in 2004 and 2005.

Gilway, the Citizens CEO, said at a July meeting that Citizens has $13.6 billion in insurance premiums.

“Citizens are in a unique financial situation, and we are prepared for whatever comes our way,” Gilway said.

In the same meeting, Gilway proposed that the number of Citizen policies will increase to 1.2 million by the end of 2022 and 1.55 million by the end of 2023. The number of policies can be as high as 1.9 million in the end of 2023.

“The more policies they have, the less (reserves) they include,” Nyce said.

Nyce is also concerned that Citizens is not prepared to handle the hundreds of thousands of claims that will arise from a major storm.

“It will be difficult for Citizens to effectively serve the 1 million policyholders they have,” Nyce said. “When they go from 400,000 policies to 1 million, do they have the resources? It’s a very tough job market.”

Although Florida lawmakers and Citizens officials want to rebuild the state’s insurance industry, they must overcome barriers such as the cost of good Citizens insurance.

State law prohibits Citizens from increasing rates by more than 11 percent a year.

Earlier this year, Citizens sought a 10.7 percent increase. But the Florida Office of Insurance Regulation approved an average increase of 7.4 percent.

At the same time, private investors have received an increase from 30 percent to 50 percent.

As a result, Citizens has become the state’s largest general property insurance company, with many of its policyholders paying rates that are significantly cheaper than what they pay to an insurance company.

“Citizens are selling insurance at a loss. There’s no better way to say it,” said Friedlander of the insurance institute.

The reduced prices have increased the difficulties for insurance companies, said Ulrich of the insurance agent group.

“There are companies that want to book business, but you can’t do it when the Citizens premium is 30 to 40 percent less than the voluntary market price,” said Ulrich.

The state legislature may consider raising the annual rate when lawmakers meet for their regulation in March, Ulrich said, though he doubts they will. do such an action.

“Well, with more than 1 million insured people in Citizens, there probably won’t be any desire to do that because of how many people will be affected, ” said Ulrich.

Even if private opportunities are available, many citizens will refuse to return to the commercial market because the payment of Citizens’ claims is guaranteed, Ulrich said.

“There’s going to be a large number of legitimate ticket holders who are going to say, ‘I don’t want to go, I don’t have to go,'” Ulrich said.

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