FILE  - Jim Boyd

Florida state Sen. Jim Boyd, R-Bradenton

(The Center Square) – Florida’s 6.2 million homeowners face significant rate increases from ballooning reinsurance costs, 2017-18 hurricane loss creep, coastal flooding and excessive litigation.

The instability threatens the financial viability of about 60 independent private insurers operating in Florida’s property insurance market, which was abandoned more than a decade ago by large insurance corporations.

Unless lawmakers can make Florida’s property insurance market more profitable for private insurers, the state-funded “insurer of last resort,” Citizens Property Insurance Corp., faces “unsustainable” growth and could bust the state’s budget, the Senate Banking and Insurance Committee was warned Tuesday.

“There’s a great sense of urgency, and we need to get our arms around this,” said Sen. Jim Boyd, R-Bradenton, who chairs the committee, one of several that began meeting this week to prepare for the legislative session that convenes March 2.

“If we don’t, I think more [private insurers] are going to leave the market, and that leaves us with fewer players servicing a very large insurance market," Boyd said. "We really need to take this very seriously.”

Several factors are spurring significant property insurance rate hikes in Florida.

Most private insurers operating in Florida are thinly capitalized and, therefore, influenced by reinsurance rates. Reinsurance essentially is insurance for insurers financed by hedge funds and other private capital.

After a decade without a landfall hurricane, Irma caused $17 billion in damage in 2017 and Michael caused $12 billion in damage in 2018. Because of loss creep from the storms, reinsurers are demanding Florida policy renewals raise rates by 25% to 45%.

More than 12 insurers have requested increases topping 15% since December 2019, including several increase requests of 30% to 40%. More insurers await hearings.

Florida Insurance Commissioner David Altmaier told the Senate committee that excessive litigation continues to plague the insurance market despite the 2019 adoption of a reform bill. He displayed Google search results for "roof insurance claim Florida," scrolling through pages of law firm solicitations.

“We need to really spend some time on this, brainstorming ideas and coming up with ways that we might be able to mitigate this kind of activity so that there’s not such an incentive to file complaints of this nature,” Altmaier said.

Sen. Jeff Brandes, R-St. Petersburg, noting some insurers have “seen a 100 percent increase in litigation,” cited an Insurance Information Institute report documenting lawsuits against Florida property insurers increased from 45,000 in 2018 to 150,000 in 2020.

“Although (insurers) operate in many states, the growth in litigation is only in Florida,” he said, predicting that without revising state tort laws, private insurers will flee, fostering an “unsustainable” increase in Citizens’ enrollment.

Citizens is a nonprofit corporation created by state lawmakers in 2002 to provide property insurance to homeowners and businesses unable to acquire coverage after corporate insurers such as State Farm, Allstate and Liberty Mutual abandoned Florida because of hurricane losses.

Citizens’ policy count swelled to 1.5 million in 2012, with the state backing $10 billion in property insurance policies. Residents can purchase a Citizens policy if they cannot find private insurance or if a policy is 15% above Citizens’ offering.

A “depopulation” initiative to transfer policies – and liability – to private insurers whittled the count to a low of 419,475 in October 2019.

Citizen’s Actuarial & Underwriting Committee said last month its policy count grew by more than 100,000 in 2020. According to its Nov. 30 "snapshot," Citizens had 532,788 policyholders, topping a half-million for the first time since 2015.

The committee reported between 2,000-3,000 new policies were being written each week and projected more than 630,000 homeowners would have Citizens’ policies by December 2021.