FL lawmakers unveil property insurance fixes, but market is ‘decentralized again’

Creating a $2 billion reinsurance fund to help insurance companies pay for catastrophic claims is a good idea, but whether it can significantly alleviate the property insurance crisis is unclear in Florida.

The creation of this fund to, in essence, provide hard-to-get stability for Florida insurance companies, is the hallmark of the bill unveiled Friday night by Republican leaders in the Senate and House of Representatives of Florida, who meet on Monday this year. second special session.

The first public hearing on the proposals will begin Monday morning before the Senate Appropriations Committee, which has scheduled it for more than five hours.

The Legislative Assembly failed to pass any amendments to the Property Insurance Act during its regular session, which adjourned on March 14, following reforms passed in 2021 and 2019.

Meanwhile, insurance experts say the crisis has worsened.

Paul Handerhan, president of the Federal Association for Insurance Reform, a Fort Lauderdale-based national nonprofit advocacy organization, told The Phoenix on Saturday that his organization intends that even a $2 billion injection of reinsurance capacity would not be enough at this point to stabilize the battered market by June 1, let alone generate the property insurance rate cuts referenced in the legislation.

“We were talking about needing $4 billion in reinsurance capacity, because of the tough reinsurance market. The week before, it got even harder,” he said. “The reinsurance market has further deconcentrated. We hear from insurance brokers that reinsurers are about to say, “We’re just going to take a break from Florida.”

Similarly, AM Best, considered a reference credit rating agency, indicated in its May 2 commentary that the crisis in Florida has led “many [reinsurers] rethink risk appetites.

“Florida property insurers may find it difficult to fully place their catastrophe reinsurance programs before the next renewal season,” wrote Chris Draghi, associate director of the agency.

Citizens Property Insurance Corp., Florida’s insurer of last resort, is buying $4.25 billion in reinsurance coverage, twice as much as last year, and it’s just one of many trying to get reinsurance from private companies that are increasingly pulling out of Florida.

Even Citizens, which has doubled its policy volume as private insurers went out of business, does not expect to find as much reinsurance cover as it needs, according to its chairman, CEO and chief executive, Barry Gilway.

The source of the $2 billion fund, titled “Reinsurance to Help Policyholders,” is general revenue, which means taxpayers’ money can be used to pay claims in the event of a disaster like a major hurricane. .

The money would not provide reinsurance for the increasingly expensive category of non-catastrophic damage caused by “localized” events such as tropical storms, lightning and hail.

Handerhan stands by his forecast, reported Thursday in the Phoenix, that the special session will not lead to lower insurance premiums, which have soared as tens of thousands of policies have been canceled outright.

“I’m not sure it will have the impact on rates that they expect. I hope I’m wrong,” he said.

On June 1, the official start date of Atlantic hurricane season, insurance companies with insufficient reinsurance will be downgraded by credit rating agencies and lose their ability to provide coverage.

“Rating agencies will have no discretion; they will have to withdraw their grades,” Handerhan said.

Homeowners whose policies have been canceled and who have not obtained replacements will enter hurricane season without insurance.

The bill also:

  • Aims to prevent insurers from refusing to cover homes with roofs less than 15 years old solely because of the age of the roof
  • Sets new limits on attorney fees in disputes between insurers and policyholders and aims to limit suspected insurance fraud resulting in inflated payments
  • Requires state regulators to quickly perform their duties of analyzing and formally reporting why insurance companies fail, and holding companies accountable
  • Allocates $150 million in matching grants of up to $10,000 to “strengthen” homes with upgrades that make them less vulnerable to damage.

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