Florida’s home insurance market is in the black for the first time in seven years, and new insurers are entering the state. Many in the industry say this indicates that recent legislative changes are working and the insurance market is showing signs of stabilizing. But with more than two months left in a record-breaking hurricane season that was initially predicted, many homeowners are wondering if Florida’s home insurance market is strong enough to withstand another hit.
“Large losses in Florida during the 2024 Atlantic hurricane season could have a negative impact on the market recovery,” said Mark Friedlander, director of corporate communications for the Insurance Information Institute. “However, insurers are well capitalized and reinsured and well positioned to weather the storm.”
Not everyone agrees that Florida’s real estate market is close to stabilizing yet, or that a stabilizing market will result in substantial savings for policyholders. Even in healthy insurance markets, home insurance rates typically rise gradually over time. The current average cost of home insurance in Florida is $5,531 per year for a home with $300,000 in home coverage, and most homeowners are hoping rates will drop significantly.
Regarding the current state of the market, Rep. Spencer Roach of Florida said, “I’d classify it somewhere between cautious optimism and wishful thinking. Only time will tell.”
What is the current state of the Florida insurance market?
The home insurance market is on the rise, according to a report from the Florida Office of Insurance Regulation (OIR). Major legislative changes over the past two years have allowed eight new insurers to enter the market, helping insurers post a net income of $266 million and a net underwriting profit of $160 million in the first quarter of 2024.
Through its attrition program, Citizens Property Insurance transferred more than 400,000 policies to the private insurance market in the past year. Lawsuits and abuse of the legal system are also on the decline, which may be why nine insurers have filed for rate cuts in 2024.
“The highest rate reduction request was a 6.9% reduction by American Integrity Insurance Company,” Friedlander said. “The average rate increase for 2024 filed with state insurance regulators is less than 2%, the lowest average in the U.S. so far this year.”
Florida insurance companies are passing on savings to their customers after legislative reforms reduced spending on defense containment costs.
— Mark Friedlander, Director of Corporate Communications, Insurance Information Institute
Florida home insurers file for rate cuts in 2024
- American Integrity Insurance Company of Florida
- American National Property and Casualty Company
- Florida Peninsula Insurance Company
- Heritage Property and Casualty Insurance Company
- Safe Harbor Insurance Companies
- Southern Oak Insurance Company
- Spinnaker Insurance Company
- Stillwater General Insurance Company
- US Coastal Property and Casualty Insurance
Florida home insurers file for zero rate hike in 2024
- American Bankers Insurance Company Florida
- American Integrity Insurance Company of Florida
- American Security Insurance Company
- American Traditions Insurance Company
- Castle Quay Insurance Company
- Castle Key Compensation Company
- Edison Insurance Company
- Florida Farm Bureau General Insurance Company
- Florida Family Home Insurance Company
- Heritage Property and Casualty Insurance Company
Florida Insurance Market Changes
Insurance is a highly regulated product, but there is a difference between regulation and complete control. States vary in the degree to which insurance commissioners can be active or passive in regulating insurance policies. However, most commissioners cannot force major changes, such as insurance company pricing, without a law passed by state legislators.
If a state passes laws that limit an insurance company’s ability to make a profit, the insurer may decide to cancel policies or withdraw from the state, which typically limits policyholders’ options and results in higher premiums.
Insurance commissioners and state legislators must therefore strike the right balance with insurers, especially in high-risk states like Florida. The goal is to enact laws that promote competition and ensure the financial stability of insurers in the marketplace while protecting policyholders’ rights to fair treatment and affordable access to insurance.
Besides extreme weather events having a disproportionately larger economic impact on the South than other regions, other significant issues that have plagued Florida for decades include:
Governor Ron DeSantis and the Florida Legislature have passed legislation addressing these issues from a variety of angles. In the 2024 legislative session, eight new bills were passed, ranging from flood disclosures to insurance data reporting. Read on for more details on each of the new laws enacted in the 2022, 2023 and 2024 legislative sessions. A detailed explanation of recent real estate law changes is available on MyFloridaCFO.
The Future of Florida’s Home Insurance Market
“It all hinges on the remainder of the hurricane season, with the most dangerous period fast approaching,” Roach said.
Roach knows firsthand the feelings of Florida homeowners whose companies have gone bankrupt and are waiting for insurance payouts. Hurricane Ian was the first time he’d experienced hurricane damage on his own property; he’d never experienced flooding in his area before.
“In Florida, just because you have an insurance policy does not mean you are actually insured. Having insurance is no guarantee that losses will be covered. In the event of a major storm, it is entirely possible for insurance companies to simply cease operations and pull out of the state. That is exactly what has happened to me and many of my constituents in my district.”
“The insurance company for my home, UPC, has gone bankrupt, leaving many of us in a difficult position,” Roach said. “Unfortunately, this is not an isolated situation and is one that taxpayers, through FIGA, end up footing the bill.”
According to Bankrate’s Extreme Weather Survey, 13% of homeowners in the South feel completely unprepared financially for potential costs if extreme weather were to occur in their area, and 16% feel somewhat unprepared — higher than homeowners in any other region. Rep. Roach’s experience highlights how easily extreme weather can occur.
With no insurance money coming in and no idea if he ever would, he had to pay about $40,000 on credit cards in the first month after the storm. Contractors wouldn’t start repairing the water damage or rebuilding his home until they received a $10,000 down payment each. And because FEMA trailers were in such short supply, he had to buy his own trailer to live in for the nine months construction was underway.
In an effort to secure the future of Florida home insurance, some homeowners may be overwhelmed by red tape and legal jargon. Many of the changes have to do with how insurance companies and adjusters handle claims and other types of government oversight. While it’s important for Florida homeowners to understand how these changes affect them, most are concerned about just two things: whether they can afford to pay their insurance claims, and whether their insurance company will help them when they need it.
Can I trust my new Florida insurance company?
“A lot of people think the only measure of the health of the Florida insurance market is the number of policies they remove from Citizens, but I think that’s completely the wrong approach and the wrong message,” Roach said. “Having nine companies come into Florida is a big win, and I don’t want to downplay it.”
But we’re trying to make it seem like there’s some magic number of new companies that will come in and take the burden off people in the free market. What we need to look at is the fundamental health of these companies coming in and their ability to pay claims when a catastrophic event occurs.
— Republican Rep. Spencer Roach of North Fort Myers
Florida has a long history of insurance companies collecting premiums from homeowners for years, then going bankrupt when a major hurricane strikes. Financial rating agencies such as AM Best and Demotech provide insight into an insurance company’s ability to pay, but that’s no guarantee that the company won’t go bankrupt.
Six insurers with A (excellent) ratings from Demotech went bankrupt in 2021. A surge in abuses of the legal system may have been a contributing factor. The companies had adequate reinsurance against catastrophic losses, but “got killed by litigation,” said Joe Petrelli, president of Demotech and co-founder of 4WARN.
House Bill 837, also known as the tort reform bill, has helped reduce the number of property claim lawsuits filed in Florida, but some have lost confidence in the current rating system and believe a new approach is needed.
Demotech, AM Best, KBRA and S&P are considered independent rating agencies, but insurance companies pay a fee to join the rating agencies, whereas Weiss Ratings does not pay a fee.
“Weiss has never received and will not accept any form of compensation from rating agencies for issuing ratings,” said Dr. Martin Weiss, founder and chairman of the board of Weiss Ratings, “nor do we accept advertising from any companies on our site. The only business model that can guarantee ongoing objectivity and accuracy is one based on complete independence, not only with regard to revenue but also with regard to data.”
Rep. Hillary Cassell of Florida co-sponsored House Bill 1661 with Rep. Roach, which would require insurance companies to include ratings of companies for which they do not receive compensation. The bill died in subcommittee but is expected to be reintroduced next year.
“All nationally recognized statistical rating agencies registered with the Securities and Exchange Commission have a ‘ratee pays’ business model,” Petrelli says. “Demotech reviews reinsurance, catastrophe response programs, disaster recovery programs and other non-public information. Weiss does not conduct such reviews because it does not interact with management.”
According to Dr. Weiss, Weiss Ratings now takes extreme weather into account. “Our ratings models apply moderate and severe stress tests to all key areas, including capital adequacy, asset quality and liquidity,” Dr. Weiss says. Another appropriate term for “severe stress testing” is “catastrophe modeling.”
Most of the new insurance companies entering the Florida market have received a Financial Stability Rating (FSR) of A (Excellent) from Demotech. Several companies have FSR ratings from Demotech and KBRA, but Slide is the only new company with ratings from both Weiss and Demotech. Demotech gave Slide an A rating and Weiss gave it a D+ rating.
Comparison of Financial Stability Ratings
| Insurance companies | Demotech | Weiss | KBRA |
|---|---|---|---|
| American Coastal Insurance Company | a | D+ | A- |
| Castle Quay Insurance Company | a | B | No rating |
| Heritage Real Estate & Casualty Insurance Company | a | D+ | BB+ Plus |
| Homeowners Choice Property and Casualty Insurance | a | C- | No rating |
| Southern Oak Insurance Company | a | C | No rating |
Can Florida homeowners still bring a valid lawsuit against their insurance company?
Ideally, homeowners insurance will pay covered claims fairly and promptly. When they don’t, insurance companies have processes in place to review and settle claims out of court. But sometimes a lawsuit is a homeowner’s only recourse, and new laws in Florida are making it more difficult for homeowners and business owners to file lawsuits.
“If I defraud an insurance company, I can go to jail,” Roach said. “If an insurance company defrauds me, my only recourse is to sue. And it’s becoming increasingly difficult for Floridians to use their influence to motivate insurance companies to pay claims that they otherwise wouldn’t.”
By eliminating ex parte attorney fees, attorneys will be less likely to take on property insurance cases because it is costly and time consuming. This discourages nuisance lawsuits, but it also means homeowners with legitimate claims have a harder time finding an attorney who will take their case and will have to pay the attorney fees themselves. Additionally, Florida law prohibits homeowners from assigning their insurance proceeds to a third party that has the means to pursue the lawsuit in court.
Will Florida homeowners see lower interest rates?
“House Bill 7073, which provides for the repeal of the premium tax, is a very positive piece of legislation,” said Rep. Roach. “It is projected to save Florida homeowners $502 million over two years as insurance companies reduce premium rates by 1.75% and policyholders receive an equal refund.”
Bankrate’s analysis of rate data from Quadrant Information Services found that Florida homeowners with $300,000 in home insurance could see their premiums decrease by $654 between January 2024 and September 2024. While this is great news, it’s important to keep in mind that the state-mandated 1.75% home and flood insurance premium tax credit is a temporary, one-year tax exemption on eligible policies. The rate reductions some homeowners are experiencing could be due to recent rate filings, changes in legislation, and the number of homeowners exiting the insurance market altogether.
Additionally, Citizens is awaiting approval for rate increases that will average 14 percent starting Jan. 1, 2025.
As of September 2024, the average cost of home insurance in Florida is $5,531 for $300,000 in home coverage, which is 142 percent higher than the national average.
Will Mother Nature give Florida enough time to turn things around?
Florida property insurance is complex and involves many intertwined factors. Many things need to go and stay right before we know how these changes will truly impact homeowners and their insurance rates. The hardest to predict, yet perhaps the most impactful factor, is extreme weather.
Florida went 11 years without a hurricane between 2005 and 2016. Another lucky hurricane-free stretch could buy insurers time to build up the surplus they need to stabilize Florida’s home insurance market.
