(The Center Square) – More than 53,000 Florida homeowners will be looking for property insurance on June 1, the day hurricane season begins, after state regulators approved requests by three state-based insurers “in hazardous financial condition” to shed policies.
The contractions are another upheaval in Florida’s stressed property insurance market after state-based insurers – approximately 60 independents remain after corporate insurers left the state 15 years ago — reported $1.7 billion in 2020 losses.
The wave of early cancellations and non-renewals comes as the state’s 6.5 million businesses and homeowners are seeing – or will see – double-digit rate increases as high as 45 percent in property insurance premiums when they renew policies.
The state’s Office of Insurance Regulation (OIR) reported it approved 105 property insurance rate changes in 2020, including 90 for increases and 55 for increases above 10%.
The rate hikes are necessary to stay solvent, claim insurers, citing ballooning reinsurance costs, “loss creep” from 2017-18 hurricanes, coastal flooding and excessive litigation in a market “spiraling towards collapse,” according to a January report, “Florida’s P&C Insurance Market: Spiraling Towards Collapse,” co-authored by Tallahassee-based James Madison Institute.
Among the report’s findings is about 6% of Florida homeowners insurance claims are in litigation, amounting in annual costs to a “solid Cat 3 hurricane.”
Florida lawmakers addressed roof-related litigation during their recently-concluded session by adopting Senate Bill 76, which slashes the time to file claims from three years to two, reduces attorney “multiplier fees” and allows insurers to cover only depreciated value of roofs more than 10-years-old.
The bill, which goes into effect July 1, has not been signed by DeSantis. If he doesn’t veto the measure, it is enacted after 15 days without his signature.
The consent orders authorized by the OIR allow the three companies to pare policyholders as “an extraordinary statutory remedy reserved to address insurers which are or may be in hazardous financial condition.”
“Allowing for the early cancellation or nonrenewal of policies is not a decision made lightly and requires a finding that such action is necessary to protect the best interests of the public or policyholders,” OIR said in a statement.
The three companies combined insure about 250,000 Florida properties and seek to shed 53,205 policies:
- Universal Insurance Co. of North America (UICNA): The May 6 order allows UICNA to drop 13,294 of 57,000 residential policies in Florida as part of a merger with Texas-based Universal North America Insurance Co. and in response to losing $4.1 million in 2019 and $22.5 million in 2020.
- Gulfstream Property & Casualty: The May 6 order allows Gulfstream to drop 20,311 of 56,000 residential policies in Florida or it “will deteriorate to an unsustainable level by mid-2021.”
- Southern Fidelity Insurance Co.: The April 28 order allows Southern Fidelity to not renew 19,600 of 133,000 Florida residential policies over 14 months, with approximately 2,300 removed June 1.
In early 2020, the OIR agreed to Southern Fidelity’s request to raise rates by 31%. But the order states the company remains in peril.
“Without the approval of this plan of non-renewal, (Southern Fidelity) would not be able to satisfy the surplus requirements of (Florida law), nor complete its long-term restructuring plan,” the order states.
The stressed property insurance market is placing increasing pressure on the state-backed “insurer of last resort,” Citizens Property Insurance Co., which is seeing its ranks — and the state’s potential liability — grow as private insurers constrict.
In January, Citizens President/CEO Barry Gilway said the state-subsidized insurer was adding about 3,000 new policies a week.
In February, Citizens held 630,000 homeowner policies, up from 542,000 in December. By the end of 2021, the number is expected to top 700,000.