Even before Hurricane Ian hit Southwest Florida, killing dozens and leaving massive flooding and devastation in its wake, the state was already in the grip of a property insurance crisis. .
Since January 2020, about ten insurance companies operating in Florida have ceased operations. So far this year, six property insurance companies in Florida have been declared insolvent and nearly 30 others are on the state’s insurance regulator’s watch list due to financial instability. .
So after Ian, how bad can our property insurance market get? WLRN spoke to the Insurance Information Institute.
“At this time, we predict that Hurricane Ian will be the second largest property loss event in United States history,” said Mark Friedlander.
He says the biggest was Hurricane Katrina in 2005, which caused nearly $90 billion in insured property losses. The Institute predicts insured property losses from Hurricane Ian of more than $60 billion.
“This will put undue pressure on small, undercapitalized Florida-based regional home insurers, in many cases,” Friedland says. “It will make a volatile market even more unstable going forward.”
This interview has been lightly edited for clarity.
WLRN: Even before Hurricane Ian, Florida homeowners were already paying home insurance premiums three times the national average. How did things get so bad?
FRIEDLANDER: We’ve been dealing with a man-made insurance crisis in Florida for many years.
It is a combination of roof replacement claim programs where unscrupulous contractors solicit claims to replace roofs for illegitimate reasons door to door across the state. And this is combined with excessive litigation filed against property insurers.
These spending pressures are bankrupting Florida home insurers. Six of the smaller insurers have already gone bankrupt this year. And it’s certainly possible that we’ll see more failures due to spending pressures from Hurricane Ian.
People whose policies have not been renewed by struggling or insolvent insurance companies have turned to Citizens Property Insurance Corporation. The company was established as Florida’s insurer of last resort. What happens if citizens are overwhelmed and run into a deficit?
At this point, Citizens appears to be in a very strong financial position to weather the storm from Hurricane Ian, as the losses did not occur in their most populated coverage areas, which is South Florida. They won’t take a major hit from Hurricane Ian, based on the analysis we’ve seen.
Last May, the Florida Legislature met in a special session to try to find a solution to the state property insurance problem. What has been decided?
The special session focused strictly on property insurance reform. And while good provisions have been passed, unfortunately, nothing has been put in place to discourage the massive volume of property claim lawsuits being filed here in the state.
As a result, there was no immediate relief in the Florida home insurance market and nothing that could begin to stabilize what is a very volatile market at this point. Maybe in 18 to 24 months we will see positive impacts from what happened in the special session, but unfortunately nothing that would help what is happening today.
What will it take to solve this struggling property insurance market in Florida?
Until legislation is passed that will discourage the excessive flow of Florida lawsuits, we will have no path to stability. Florida will remain the most volatile [property insurance] US market
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