Can Florida’s troubled property insurance market survive Hurricane Ian?

Even before Hurricane Ian hit southwest Florida, killing dozens and causing massive flooding and devastation, the state was already in a property insurance crisis.

As of January 2020, a dozen insurance companies operating in Florida have gone out of business. So far this year, six Florida property insurance companies have been declared bankrupt and nearly 30 others are on the State Insurance Commission’s watch list due to financial instability.

So how much worse can our property insurance market get after Ian? WLRN spoke to the Insurance Information Institute.

“Right now, we expect Hurricane Ian to be the second largest property loss event in US history,” said Mark Friedlander.

He says the biggest was Hurricane Katrina in 2005, which caused nearly $90 billion in insured property damage. The institute estimates that Hurricane Ian will incur over $60 billion in insured property damage.

“That will put undue pressure on the smaller, regional — in many cases — undercapitalized home insurers in Florida, Friedland says. “This will make a volatile market even more unstable going forward.”

This interview has been edited slightly for clarity.

WLRN: Even before Hurricane Ian, homeowners in Florida were paying property insurance premiums three times the national average. how did it get so bad

FRIEDLANDER: We’ve been dealing with a man-made insurance crisis in Florida for many years.

It is a combination of roof replacement claim settlements in which unscrupulous contractors make unlawful roof replacement claims door-to-door statewide. There are also excessive lawsuits against property insurers.

This cost pressure is putting property insurers out of business in Florida. We have already failed six of the smaller insurers this year. And certainly there is a possibility that we could see more defaults due to cost pressures related to Hurricane Ian.

Citizens Property Insurance Corporation has been contacted by people whose policies have not been renewed by struggling or bankrupt insurance companies. The company was formed as Florida’s insurer of last resort. What happens when Citizens is overwhelmed and experiences a deficit?

At this point, Citizens appears to be in a very strong financial position to weather Hurricane Ian’s storm as losses did not occur in their most populous coverage areas, South Florida. According to the analysis we’ve seen, they won’t be hit hard by Hurricane Ian.

Last May, the Florida Legislature held a special session to try to find a solution to the state’s property insurance problem. What was decided?

The special session was strictly focused on property insurance reform. And while some good regulations have been passed, unfortunately nothing has been done to discourage the massive number of property claims lawsuits being filed here in the state.

As a result, there was no immediate relief for the Florida home insurance market and nothing that would begin to stabilize what is currently a very volatile market. Maybe 18 to 24 months from now we will see some positive effects from what happened in the special session, but unfortunately nothing that would help what is happening today.

What will it take to fix Florida’s ailing property insurance market?

Until laws are passed that deter the excessive flow of lawsuits being filed in Florida, we will have no path to stability. Florida will continue to be the most volatile [property insurance] market in the United States