By: Chad A. Kunde, Director of Business Climate and Governance Policy, Florida Chamber of Commerce
In the annual Florida Business Agenda survey, Florida Chamber members shared that Florida’s property insurance market remains a top concern. This concern is only heightened by Hurricane Idalia. Florida remains at high risk for natural disaster, but the manmade disaster plaguing our insurance market for the past 15 years is finally receiving the attention consumers and competitors have long deserved.
Over the past few years, the legislature has enacted substantial reforms led by the Florida Chamber to improve the stability of Florida’s insurance market, reduce frivolous litigation, attract new capital investment, foster competition, and offer relief to Floridians. Already, positive trends are emerging, bringing us closer to reaching several goals outlined in the Florida 2030 Blueprint that are impacted by the state of Florida’s property insurance market.
Florida 2030 Blueprint Goal: Actuarially Sound Property Insurance Rates Based on Actual Risk and Competition
Recent data shows that Citizens Property Insurance Corporation (Citizens), Florida’s intended insurer of last resort, has seen an increase of over 382,000 policies from June 30, 2022 to June 30, 2023. Florida statute limits rate increases for Citizens, capping them at 12 percent for 2023 unless statutory exemptions apply. This regulatory measure means that Citizens’ rates are significantly lower than the private market, where rates have been rising exponentially higher. In fact, nearly 99 percent of Citizens’ rates are lower than those of the private market. Recent legislative efforts empower the private market to compete more effectively with Florida’s government insurance program, while aiding Citizens in its return to its intended role as the insurer of last resort.
Recently, the Florida Office of Insurance Regulation announced that private insurance carriers have taken on 280,000 policies from Citizens following the historic reforms. This is a significant development as more take out policies have been requested in the first half of 2023 than were requested in all of 2022. This transition of policies from taxpayer-backed Citizens to the private market signifies a positive shift, indicating that the private insurance market is attracting increased capital and becoming more competitive. As the private market continues to absorb policies from Citizens, progress is made toward achieving the Florida 2030 Blueprint goal of establishing actuarially sound property insurance rates based on actual risk and competition. The restoration of Citizens as the insurer of last resort is crucial for the overall health of the insurance market and helps mitigate the risk of assessments or “hurricane taxes” being charged to Florida policyholders of not just private property insurance, but many other insurance lines like business interruption, auto and even pet insurance!
Florida 2030 Blueprint Goal: Regulatory, Labor, and Operating Risk Environments Rated Among Top 5 in the Nation
Before the two property insurance-focused special sessions in 2022 and the subsequent 2023 regular legislative session, Florida’s property insurance market was in crisis. Florida was responsible for over three-quarters of property insurance litigation across the country in recent years, while only accounting for seven percent of the nation’s claims. Private carriers were either reluctant to expand their business or were exiting Florida entirely, while taxpayer-backed Citizens expanded significantly, reaching its largest size in over a decade. However, recent indicators suggest that the regulatory, labor, and operating risk environment is on an upswing, with positive impacts stemming from legislative reforms. The Florida Office of Insurance Regulation’s approval of five new private companies this year to write new homeowners policies in Florida is notable progress from the nine home insurance carriers declared insolvent in 2021 and 2022.
Other signs of improvement in the operating risk environment are also becoming apparent. Financial statements show positive profitability trends for Florida’s domestic property insurance sector. Over the last six years, the industry experienced yearly deficits in both overall earnings and underwriting. However, underwriting losses have significantly dropped, and there was a small positive net income in the first quarter of 2023. Additionally, data from Citizens indicates a roughly 17 percent reduction in litigation when compared year-over-year, showing the legislative reforms appropriately tackled a significant cost driver in the property insurance market. While the impact of the reforms will take several years to fully materialize, several positive indicators suggest that Florida’s regulatory, labor, and operating risk environment pertaining to the property insurance market is improving.