No quick fix as Florida property insurance reforms fail to pass

Insurance, reinsurance and insurance-linked securities (ILS) markets hoping that some of Florida’s legislative actions targeted at reforming the challenged property insurance market might pass this year, look set to be disappointed again.

The last hope now seems to be a special legislative session, that some lawmakers are calling for after the 2022 Florida Legislative session ended Friday without any passage of property insurance reform bills.

At least two Florida Senators called for a special legislative session devoted to Florida’s property insurance crisis after three bills failed to pass in the current session.

Measures included this year were designed to both limit losses for insurers, by attempting to control some of the runaway claims inflation, while also stemming price rises for Florida’s insurance consumers.

There were also reforms designed to force greater outflow of policies from Florida Citizens to the private market, to try and stop its seemingly exponential recent growth.

Senate Bill (SB) 468 bundled the attempt to downsize state-backed Citizens Property Insurance Corporation alongside other minor legislative reforms, but despite passing the Senate in February and amendments also passing the House last week, this Bill was indefinitely postponed as the session closed.

SB 1702, designed to address safety and quality concerns at high-rise condominium buildings across Florida through more regular inspections also failed to get heard on the Senate floor.

While 1728, which was the measure expected to have the greatest impact for insurance and reinsurance markets, due to removing the requirement for full replacement on many wind-damaged roofs while also applying a 2% deductible to roofs, also failed to be passed in the current legislative session.

All of which means that Florida’s property insurance market is now heading rapidly towards the 2022 Atlantic hurricane season with little changed from prior years, while at the same time carriers continue to be affected by loss creep from previous hurricanes and are also now grappling with rising reinsurance costs and the looming renewals that threaten to be some of the toughest on-record for the state’s insurers.

Unless a special legislative session is called, which many see as unlikely, there will be no specific relief for homeowners on their insurance costs this year, with only the prospect of more increases in price thanks to rising reinsurance rates for their carriers.

At the same time, Florida carriers continue to fail as well, as documented in our recent article.

Of course, reforms like the roof replacement not passing just mean an increasing number of homeowners will pay more, or not be provided quotes by carriers that are seeking to avoid potentially fraudulent roof replacement claims.

It is consumers that suffer from the lack of reform, but this also has ramifications for reinsurance and ILS market participants, particularly when the next major storms strike Florida.

Broader tort reform is still required in Florida to stem the broader issues related to fraudulent claims that have been experienced in the past and absent any legislative progress, the state becomes increasingly hard for insurers to operate in, resulting in accelerating rate demands and even higher reinsurance.

The June 1 reinsurance renewal is fast-approaching and anticipated to be one of the more challenging of recent decades.

There are some pricing signals available through recently launched catastrophe bonds, with the first pure Florida wind deal (Hestia Re from insurtech Kin) and a multi-state but still significantly Florida wind-exposed transaction (Manatee Re II Ltd. from Safepoint) both pointing to higher multiples and pricing for cat bond backed reinsurance covering the state.

Also read:

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