Florida Banking July 2023

PROPERTY INSURANCE

HUNKERING DOWN DURING FLORIDA’S PROPERTY INSURANCE CRISIS

BY KENNETH PRATT, SENIOR VICE PRESIDENT OF GOVERNMENTAL AFFAIRS, FBA

T oday, Floridians are all struggling to deal with the significant rising costs of just about all consumer goods — in many parts due to rising inflation. However, no other individual financial challenge is perhaps more significant for Florida families than the triple digits exponential rising cost of property insurance premiums. Analyzing the Crisis By most accounts, there are several drivers that are primarily responsible for Florida’s insurance crisis. One of those factors has been the poor litigation environment for property insurance claims. As usual, there are bad apples on both sides of this equation — insurance companies that don’t settle claims fairly and quickly and trial lawyers who drag out litigation and the associated costs to purposefully receive sky high jury awards. The Insurance Information Institute has reported data that shows Florida ranks number one in homeowner’s insurance related litigation and that Florida litigation makes up 79% of the lawsuits in the U.S. while accounting for just 9% of the total claims. Another major factor impacting the market has been the rapidly rising cost for insurers to purchase reinsurance. Insurers are required to purchase appropriate reinsurance to appropriately spread more of their risk and ensure that they are financially prepared to pay out claims under catastrophic circumstances. Add to all of that that we have seen thousands of recent policy cancellations, 15 property insurers have gone insolvent since 2020, FIGA’s 1% emergency assessment to policyholders and warmer waters which continue to surround our shores and which have strengthened chances of more devastating storms to come. For many years, the issue of unavailability in Florida’s property insurance market was largely one that was limited to a Florida seaside stretch from Fort Lauderdale to Key West. Over the past

5 years, the issue has now expanded to both coasts of our peninsula and has risen to Orlando, Tampa Bay and Florida’s panhandle coast as well. Now, the Fort Lauderdale to Key West areas of Florida not only struggle with the cost of premiums, but these residents are simply finding it impossible to secure full coverage (wind, storm and flood) from any insurer at all. Insurance agents have also widely reported that even securing coverage through Citizens Insurance Corporation, Florida’s insurer of last resort, has been difficult for certain segments of Floridians who do not meet the company’s thresholds, as established by the Florida Legislature. Legislative Reform Efforts Florida’s Legislature has been debating solutions to the property insurance issue and making some smaller reforms to the market over the past 7 to 8 years. However, over just the past year, Florida’s Legislature has passed two major legislative reform packages in the property insurance market in an attempt to more fully address the issue. During 2022, legislators convened for two special sessions to address the property insurance crisis. In May of 2022, the legislature passed SB 2A and 2D which focused on funding hurricane home hardening grants, reforming contractor solicitations, allowing insurers to offer separate roof deductibles and requirements to mandate that insurers move faster in their processing of hurricane claims. The legislature also convened another Special Session in December of 2022 to put in place more historical reform. During that special session, legislators passed SB 2A which: • Repeals the one-way attorney fee provisions for property insurance claims, leaving both parties responsible for paying their attorney fees; • Prohibits the assignment (in whole or in part) of any post-loss insurance benefits for policies issued after January 1, 2023;

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