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Florida Insurance Warning Issued as Fears Grow of Collapse


Florida legislators need to act to solve the state’s property insurance crisis before a major hurricane strikes later this season, state Representative Hillary Cassel warned during a televised interview this week.

“It’s not a matter of if; it’s a matter of when,” the Democrat said during an interview with Local 10 This Week in South Florida. “We have to make some big changes here in Florida,” Cassel, an attorney who previously worked for insurers, added.

Homeowners in Florida are struggling with skyrocketing home insurance premiums. The state faces an ongoing crisis brought about by a perfect storm of excessive litigation, widespread fraud, and the growing risk of more frequent and more destructive extreme weather events, fueled by climate change.

A girl rides a bicycle at Founder’s Square in Babcock Ranch, Florida, on December 5, 2023. State Representative Hillary Cassel warned that efforts to depopulate Citizens won’t be effective.

MARCO BELLO/AFP via Getty Images

The risk of an explosion of damage claims in the state, which could quickly bury companies’ profits, has led to something of an exodus in the past couple of years; several private insurers operating in Florida have cut coverage in some of the areas most vulnerable to natural disasters, or have withdrawn from the state entirely.

As a result of this exodus, the state’s insurer of last resort, Citizens Property Insurance Corporation, has grown massively in the past few years. Data provided by the entity showed that Citizens had a total of 443,229 policies in late January 2020; in late December 2023, it had reached 1,167,579 policies.

Despite recent efforts to offload some of Citizens’ policies to private insurers over concerns about the financial risk, should the state get hit by a major hurricane, the insurer of last resort still has the single largest share of homeowner policies in Florida.

While Citizens is undergoing a “depopulation” program, which is aiming to have 500,000 property owners find coverage in the private market, the insurer of last resort has seen a recent surge in policies as hurricane season kicks off.

According to Citizens’ depopulation program, a private insurer can take one of its policies as long as their premium represents a 20 percent increase or less, compared to its own renewal premium. Cassel said this strategy doesn’t do enough to address the affordability problem plaguing the property insurance sector in Florida, and will only lead to a repopulation of Citizens down the line.

“This allows, to some extent, the legislators to pat themselves on the back, to say, ‘Look, we’re making all of our efforts to depopulate Citizens.’ But at what cost to consumers?” Cassel said on This Week in Florida.

“You get that 20 percent, but that 20 percent rate increase is only for the first year; there’s nothing in law […] that says what happens in the following year. If that rate increases and goes above that 20 percent, what’s actually going to happen? These people are going back to Citizens,” Cassel added.

“We are really kind of kicking the can down the road a little bit further because, when they go to price it, they are not going to stay with that surplus line carrier that may be 30 percent, 40 percent, 50 percent—they are going to go back into a Citizens policy,” Cassel said about the insurer of last resort.

Cassel said that what Florida’s property insurance market needs, especially ahead of a potentially devastating hurricane season this year, is an increase in the number of independent agencies rating the state’s insurers—especially small domestic carriers that are currently not required to be rated.

This, Cassel added, would help homeowners have “a better understanding of how solvent these companies really are.”

Benjamin Collier is a risk management and insurance professor at the Fox School of Business at Temple University in Philadelphia, Pennsylvania. He told Newsweek that this hurricane season “is shaping up to be a concerning one for Florida.”

“Forecasters predicted that this will be an especially strong hurricane season, and record-breaking Beryl suggests that they’re right,” Collier said. “The season is just getting started, and that’s creating a lot of concern for places like Florida.”

Collier’s worry, the same as Cassel’s, is that a major hurricane this season could “wipe out some of the small insurers in the state.”

“The small insurers often cater to lower-income homeowners. If an insurer goes insolvent, the state has a fund that will play claims to its policyholders. But getting a claim paid through this state fund can take a long time, months or even years,” Collier said.

“That’s a big challenge for folks trying to rebuild their homes. Some small insurers attract customers with lower rates, but, in my view, it’s not worth the extra risks. If you just survived a hurricane, the last thing you want is to have to jump through a bunch of hoops to get your claim paid.”