With good news comes bad, and vice versa in Florida’s growing but rapidly deteriorating property insurance market, industry analysts said at a two-day insurance summit from the Florida Chamber of Commerce last week.
First up, some good news: Florida is on track to add 4 million more people and 2 million more jobs by 2030, a stated Florida House target and a godsend for most businesses in the United States. state, said chamber president Mark Wilson.
And the bad news: Most of this growth will occur in metropolitan areas of the state, which will significantly concentrate the risk for property and casualty insurers. One or two major hurricanes could cause unprecedented losses.
“If you meet your economic development goals, which I have no doubt you will achieve, you will have insured loss exposure of almost $ 1,000 billion,” said John Seo, co-founder and director General of Fermat Capital Management, an international company that finances alternatives. investments, including reinsurance.
And if Florida’s current climate of storm losses, excessive litigation, fraud and limits on rate increases continues, insurers simply won’t be able to cover those losses, have warned. industry veterans.
“Can the insurance offer keep up with growth?” The answer is ‘no’ right now in the private market, âsaid Chris Dittman, senior managing director at Aon, the multinational insurance provider.
Without higher rates, more insurers will likely stay out of the Florida market, he said. While Floridians have seen property insurance premiums rise steadily in recent years, they have not been sufficient to provide the returns investors want in insurance and reinsurance companies, Dittman said. Four insurers have gone insolvent in recent years and others have pulled out of the state or stopped writing new policies, leaving a growing insurance gap.
âThe premium levels still seem insufficient,â he said.
Florida is considered five times riskier than the rest of the country, but the average homeowner’s premium is only 1.6 times the national average, Dittman said, citing data compiled by the National Association of Insurance Commissioners.
âAlthough the rates have increasedâ¦ they would still need to increase significantly enough for us to achieve rate adequacy,â said Suzanne Williams-Charles, director of policy and regulation for the Association of Insurers and Reinsurers of Canada. Bermuda.
President Biden’s proposed global corporate tax, if finalized, will hit reinsurers who have enjoyed low overseas tax rates for decades. That cost will be passed on to insurers and ultimately policyholders, especially in the storm-prone coastal states of Florida and Texas, Williams-Charles said. Bermuda-based reinsurers now provide more than 60% of reinsurance and catastrophe insurance in Florida, she noted.
The good news on the reinsurance front is that there is plenty of global capital to fund disaster recovery through the bond market and innovations are being developed, Williams-Charles and Seo said. Conventional reinsurance has a âtable limit,â to use a casino analogy, of around $ 50 billion per geographic area or region, Seo explained.
âIf you look at what we’re doing on the cat fund side, we’re providing an additional $ 50 billion,â he added. âWe are essentially doubling the size of the reinsurance market. “
Globally, with the boom in the cryptocurrency market and the resulting “foam”, “there is now an additional $ 20 trillion of capital in the world with no useful place to go. “Seo said. The catastrophe funds market will benefit from this.
Another potential bright spot: Some major Florida lawmakers are planning another round of bills that they hope will help reduce insurance litigation and claims settlement costs, at least to a limited extent. At a roundtable on Friday, State Senator Jim Boyd, chairman of the Senate Banking and Insurance Committee, pledged most strongly to making changes to Senate Bill 76, which was adopted during the legislative session of 2021.
This bill introduced a number of reforms, which, according to some reports, have already reduced claims litigation in the state. But a state court temporarily struck down a key issue – the limits on the ability of roofing contractors to solicit homeowners who may not need a new roof.
âI think SB 76 will have an impact, but there is still work to be done,â said Boyd, who also owns an insurance agency in Bradenton. “This is something that we cannot wait another year to tackle.”
Roofing suppliers have doubled down on solicitations and âdirection of paymentâ agreements to bypass 2019 legislative restrictions on the granting of benefits.
âWe have to do something,â Boyd said. âThey are pointing the finger at us now. “
On the flip side, Boyd and other panelists said there appears to be little appetite in the next session to lower the state’s disaster fund threshold to $ 17 billion. Some insurance industry advocates have called for the cat fund to be made available to insurers when the industry’s losses in a single year are about half of the current threshold.
Lawmakers, who will be busy in the 60-day session dealing with the redistribution and other issues, will also have little appetite to review auto insurance laws. Last year, the legislature repealed Florida’s personal injury protection requirement, but Gov. Ron DeSantis vetoed it. The 2022 session begins on January 11.
A resolution of the bad faith allegations problem will also have to wait until next year, lawmakers said. Insurance attorneys have said Florida law encourages plaintiff attorneys to file bad faith claims far too quickly, even when claims have been legitimately denied, costing insurers millions of dollars in litigation costs. and legal fees.
Senator Jeff Brandes, R-St. Petersburg, made it clear that the insurance industry has done a terrible job of explaining to consumers how dire the market is and how out of control the lawsuits are. And few members of the Legislature are sufficiently informed or willing to help.
“We have real problems and the leaders of the Legislature are not coming at the sound of your arms,” ââhe said. “You are on your own until things get drastically worse.”
Florida Price Trends Losses Profit Trends