The real estate insurance market in Florida was already in jeopardy. And now comes Hurricane Ian.
The huge storm that battered the southwest of the state with catastrophic winds, rains and flooding is likely to further damage the local insurance market, hit by billions of dollars in losses, insolvencies and skyrocketing premiums.
The scale of the devastation wrought by the storm will become clearer in the coming days, but there are concerns that it could exacerbate existing problems and overburden a state insurance program that has already seen policy prices rise sharply amid difficulties. of homeowners to find coverage in the private market.
“Florida’s home insurance market was the most volatile in the United States before Hurricane Ian struck and will likely become even more volatile after the storm,” said Mark Friedlander, director of communications at the Institute for Insurance Information.
The private insurance industry has lost more than $1 billion in each of the past two years, and hundreds of thousands of Floridians have seen their policies canceled or not renewed. Average annual premiums have risen to more than $4,200 in the state, triple the national average.
More than a dozen companies have stopped writing new policies in the state, and several have closed their doors this year. A company was declared insolvent and placed in receivership this week as Ian was en route to Florida.
Homeowners who have been unable to find coverage or cannot afford the plans have turned at the last minute to the state’s public insurer, Citizens Property Insurance, which this summer surpassed 1 million policies for the first time in nearly a decade. The state legislature created Citizens Property Insurance in 2002 for Floridians who are unable to obtain coverage from private insurers.
Regulators and local insurers have long said that lawsuits filed by homeowners are a major cause of the state’s crisis. They say state law makes it very lucrative for lawyers to sue insurers, even if the amount won is relatively small. In the last half of the 2010s, Florida accounted for about 8% of all homeowner claims in the United States, but nearly 80% of all homeowner claims against insurers in the country, according to a letter from the State Office of Insurance Regulation.
In May, as hurricane season approached, the state legislature called a special session to address the insurance crisis. In three days, and with little public input or expert analysis, congressmen passed a broad bill with bipartisan support that many in the legislature saw as an important first step toward restoring the market.
The provisions included creating a $2 billion reinsurance program that insurers could buy to protect themselves from risk, provided they reduced rates to policyholders. The law provides grants of up to $10,000 to retrofit homes to make them less vulnerable to hurricane damage. It also seeks to limit various attorney fees in insurance-related lawsuits.
Still, Florida’s top ratings agency, Demotech, threatened this summer to downgrade some two dozen companies. But concerns about its solvency eased somewhat after the administration of Gov. Ron DeSantis agreed to allow the state to support insurers.
In pre-storm press conferences, DeSantis noted that flood claims could be a big problem after Ian hit.
Homeowners insurance policies—including those from Citizens—do not include flood coverage, which is handled under a federal program and is a separate matter from the insurance marketplace. Federally backed flood insurance is generally required for foreclosed homes in flood-prone areas, but it is sometimes declined by people who own their own homes and is less common in areas They are not usually prone to flooding.
“We’re seeing a lot of flood claims,” the governor said when asked about the possibility of claims exceeding the capacity of Citizens Property Insurance. “I’m not saying there’s not going to be a lot of wind damage, I mean, we’re looking at a hurricane, and you’ll probably see that.”
“There is more that I want to do in terms of wind damage insurance and that will be something we will address. At the end of the day, we have to make sure people get care, and that’s what we’re going to do, no matter what we have to do.”
More than 2.5 million people in Florida were ordered to vacate their homes before Ian made landfall Wednesday afternoon. Some residents left their homes hoping to find minimal damage upon their return.
“I don’t see the advantage of sitting here in the dark, in a hot house, watching the water come into your house,” said Tom Hawver, a handyman in Fort Myers, who evacuated his home Wednesday. “And I can’t do anything about the wind and the water, so I’ll come back in a couple of days and do an assessment.”