Florida insurance reforms pass Senate, but may not save all carriers

Florida’s lawmakers continue to progress new legislation that they hope will stabilise the states dysfunctional property insurance market, with the package of bills now passing the Senate and heading to the House today.

This is the second hurdle for the property insurance reforms, after they passed a committee on Monday.

During a sometimes heated debate in the Republican controlled Florida Senate, a number of amendments proposed by Democrats and pushing for immediate rate reductions or freezes were rejected.

Senate Republicans touted the package of bills as the best path for long-term property insurance market stabilisation, but our sources continue to suggest that shorter term these are unlikely to be sufficient to save all challenged insurers in the state.

With some lawmakers, even those that wrote some of the bills making passage, saying that rate reductions are unlikely to be felt by homeowners for a year or more with these bills, there are calls for more to be done.

The package of reforms moving through the legislature in Florida includes proposals for the $2 billion Reinsurance to Assist Policyholders fund, which would act as a kind of lower-layer to the Florida Hurricane Catastrophe Fund (FHCF).

While this could have an immediate effect to the benefit of some carriers this year, meaning they do not need to buy all of the now very expensive lower-layer reinsurance coverage that they might have been targeting, it is not seen as a measure that will ultimately support bringing more private reinsurance capital appetite back to the Florida market.

The package making progress also includes measures on roof replacement percentages, limiting one-way attorney fees, retrofitting properties to harden them to storms, and oversight of the insurance industry in Florida.

It’s all positive change and likely to assist in stabilising the fraud and litigation situation, with some saying this could be significant for reducing assignment of benefit (AOB) claims in the state, but there remains scepticism over whether it will prove to be enough further down the line.

As well as stabilising the Florida property insurance market and enabling carriers to buy the reinsurance they need to retain their all-important ratings, the market really needs to stem the litigation tide immediately to reduce the burden on struggling carriers.

There are a number of carriers, as many as 25 according to Demotech, that have not been able to fill their reinsurance requirements so far, with the renewals date and deadline for their ratings fast approaching.

Uncertainty over this (whether carriers can all fill gaps in their towers) will persist to the end of this week at least, perhaps even right up to the June 1st renewal date, it now seems.

The $2 billion RAP fund could make a difference here, if implemented immediately at the end of this special session, but we’re told it may still not be sufficient to save all the most exposed carriers.

In fact, we understand from sources that the general opinion of lawmakers in Florida is that losing a few weaker insurers at this time may be unavoidable, as significant enough reforms could not be passed to save them all without the state taking on much more risk, which taxpayers would be on the hook for.

Which suggests we could see a flurry of downgrades and failures even as the hurricane season begins.

Legislators are fully-aware of the fact some carriers are so exposed right now that this package of immediate property insurance reforms are unlikely to prevent more policies flowing towards Citizens and more cancellations coming.

Speaking with a source in Florida last night, we were also told that the RAP fund may not result in the rate reductions lawmakers are hoping for and that for any reductions to be sticky the litigation crisis also needs solving.

Lawmakers appear to be hoping that the immediate package of insurance reforms can get the industry through this renewal and hurricane season, while more work will be put into further reforms for the next official session of the legislature, before the same crunch-point is reached next year.

As we’ve also been explaining in our coverage, it is critical that Florida’s lawmakers enact sufficient reform to encourage reinsurance and capital markets appetite back to the state, and at lower pricing levels.

To sustain Florida’s property insurance market long-term and in a more functional manner, efficient reinsurance capital is required and access to catastrophe bond capacity from capital market investors.

While they will remain in the state, their confidence and appetites won’t be rekindled without some certainty that litigation and fraud, in property insurance, has been significantly quelled.

That just doesn’t appear the case quite yet, so it seems Florida’s lawmakers could have more work to do in 2023, when the Senate Session is scheduled to begin later than it did this year, currently set to run March 7 through May 5, 2023.

That would put any further changes right up against the reinsurance renewals again, so lawmakers may be advised to keep that in mind, or they could find themselves in a situation where if the reforms this year don’t go far enough and the normal session fails again in 2023, there wouldn’t be time for another special session to be held before the critical renewal dates came around.

Of course, we will have to give it some time for the currently-debated reforms to bed in and take effect. While there are positive signs and some reforms that could make a meaningful difference, over time, the consensus still seems to be that what is on the table right now is not really enough to fully reform Florida’s property insurance market, implying there will be more work to do.

Read our coverage of Florida’s property insurance crisis below:

Florida’s insurance carriers over-litigated, not under-capitalized: Demotech’s Petrelli.

Florida insurance bills pass first hurdle. But details to matter.

Florida: Some carriers are on life support, others about to pull the plug.

Florida’s special session property insurance reforms: Opportunity lost?

Florida Citizens CFO says risk transfer markets in “disarray”.

“Really significant” property insurance reforms for Florida: DeSantis.

Florida “flash point” as reinsurance market begins to throw in the towel: ALIRT.

FedNat details Florida downsizing plan, says Monarch to be acquired.

Florida Special Session to focus on fraud, AOB abuse & affordability: CFO Patronis.

More insurers seeking rate hikes of 23% to 49% in Florida.

Cat Fund reform is crumbs, Floridians need a feast: Demotech’s Petrelli.

Florida litigated claims rise again, but “hope” in Special Session: CaseGlide.

Florida – “The theatre is on fire,” FHCF change won’t solve it: RenRe CEO.

Swiss Re not optimistic on Florida reinsurance pricing: CFO Dacey.

To ensure progress in Florida reinsurers could pull capacity: Assured Research.

Full placement of Florida reinsurance programs to be challenging: AM Best.

Florida Governor sets property insurance special session for end of May.

“Cause for concern” as AOB & litigated claims rise in Florida: CaseGlide CEO.

Ida insolvencies continue, as Florida runs out of road: ALIRT.

Florida property insurance market “in collapse”, special session uncertain.

Florida renewal “one of the toughest in recent memory” – JMP Securities.

Demotech calls for Florida market reform with rating downgrades likely.

No quick fix as Florida property insurance reforms fail to pass.

Another one bites the dust – Florida’s insurance failures continue.

Assignment of benefit (AOB) claims rising for Florida P&C insurers.