TALLAHASSEE, Fla. — Florida’s property insurance market was already in peril. Now comes Hurricane Ian.
The massive storm that swept through southwest Florida, bringing with it torrential rains and flooding, is likely to further damage Florida’s insurance market. This market has been struggling under the weight of billion-dollar losses, insolvencies, and skyrocketing premiums. The extent of the storm’s devastation will be more apparent in the coming days, but there are concerns that it could worsen existing problems and burden an insurance program that has already seen a sharp rise in policies due to homeowners struggling to find coverage on the private market.
“Florida’s property insurance market was the most volatile in the U.S. before Hurricane Ian formed and will most likely become even more unstable in the wake of the storm,” said Mark Friedlander, communications director at the Insurance Information Institute.
The private insurance industry has lost more that $1 billion over the past two years, and hundreds of thousands have had their policies cancelled or not renewed. The average annual premium in Florida has risen to over $4 ,200, more than triple the national average.
More than a dozen companies have stopped drafting new policies in the state and many have closed their doors this year. Ian was busy churning towards Florida when one company was declared bankrupt and placed in receivership.
Homeowners unable to get coverage or priced out of plans have flocked to the state’s public insurer of last resort, Citizens Property Insurance, which this summer topped 1 million policies for the first time in almost a decade. Citizens Property Insurance was established by the state legislature in 2002 to provide coverage for Floridians who are unable or unwilling to get coverage from private insurers.
State regulators and insurance companies have long blamed homeowners for the state’s current crisis. They claim that state law allows lawyers to sue insurance companies, even if the amount won may be small. According to a letter from Florida’s Office of Insurance Regular, Florida accounted in the last half of the 2010s for approximately 8% of all homeowner’s claims in the U.S. and almost 80% of all homeowners lawsuits against U.S. insurers.
In May, with hurricane season approaching, the state legislature convened for a special session to address the insurance crisis. With little input from the public or expert analysis, lawmakers passed sweeping legislation with bipartisan support. Many in the statehouse considered it a significant first step towards repairing the market.
The creation of a $2B reinsurance program that insurance companies could purchase to insure themselves against risk and reduce rates for policyholders was one of the provisions. The law offers grants of up to $10,000 to retrofit homes so they are less vulnerable to hurricane damage. It also allows for the limitation of various attorney fees in insurance-related lawsuits.
Despite this, Florida’s primary rating agency Demotech threatened this summer to downgrade around two dozen companies. However, concerns about their creditworthiness have subsided somewhat under Gov. Ron DeSantis agreed that the state would support the insurers.
DeSantis noted that flooding claims could be a problem for Ian during news conferences.
Home insurance policies, including those in Citizens, do not include flood coverage. This is handled under a federal program that is separate from the insurance market. Flood insurance, which is federally backed, is required for mortgaged homes located in flood zones. However, people who own their homes may decline to get it. It’s also less common in areas that are not prone to flooding.
“The governor responded to questions about flood claims that could overrun Citizens Property Insurance. “I don’t think there won’t be wind damage. I mean, it’s a hurricane so that you’re likely see that.
“There is more I want to do regarding wind insurance, and that is something we will address. I mean look, at the end of the day we’ve got to make sure folks are taken care of, and so we will do that, whatever we need to do.”
DeSantis, at a news conference Wednesday, said Citizens Property Insurance should be in solid shape even after claims from Hurricane Ian, given that the state-backed company has billions of dollars in surplus. A spokesman for Citizens said it estimates 225,000 claims and $3.8 billion in losses from Ian, though he noted those projections were made before the storm made landfall and would likely change as damaged is fully assessed. Their modeling, which was based on paying out large amounts in claims for this, showed that they would still have between four and five billion in surplus. DeSantis stated that they believe they are able to weather it.
Around 2.5 million people in Florida were subject to mandatory evacuation orders when Ian struck land Wednesday afternoon. Many residents fled their homes in the hope of sustaining minimal damage when they return.
” I don’t see any benefit to sitting in the dark, in hot houses, and watching water enter your house,” said Tom Hawver of Fort Myers who evacuated his house Wednesday. “And I can’t do anything about the wind or the water, so I’ll go back in a couple of days and assess it.”
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