Home insurance rates in Florida are on the rise again, as rate increases are passed on to homeowners by reinsurers.
Reinsurers are partially responding to five years of damage caused by the catastrophe around the world, though Florida has been largely spared. Many are concerned that hurricanes and wildfires are intensifying as a result of climate change. Reinsurers back up insurers, helping them pay claims.
There is another driver for the higher rates in Florida. State suffers from what insurers see False ceiling claims and excessive litigation associated with these claims. Those costs hurt the profits of insurers and reinsurers. The state has passed legislation to limit lawsuits but insurers say the problems persist.
The withdrawal of reinsurers in Florida raised prices for insurers and homeowners: Florida-Focused Home Insurers Contract ready for this year’s hurricane season. Negotiating those treaties is a springtime ritual in the Sunshine State.
Roofers working on an elevated house on Mexico Beach, Florida, after Hurricane Michael’s landfall in 2018.
photo:
Douglas R. Clifford/Zuma Press
This year’s process was “simply bad” due to limited availability and high prices, said Joseph Petrelli, president of Demotech Inc., a rating firm specializing in Florida’s residential property-insurance market. Many prices ranged from 15% to 25% this year, he said.
Kevin McCarty, a former Florida insurance commissioner whose Celtic Global Consulting specializes in insurance, said many Florida homeowners will face premium increases of 5% to 10% to help their carriers pay for more expensive reinsurance .
Floridians already Pay Some of the Highest Home-Insurance Premiums The country averaged $4,231 this year, according to estimates from the trade group Insurance Information Institute. The rate hike is subject to regulatory review.
Florida homeowners’ premiums have risen at double-digit rates in recent years partly to offset damage from roofing claims and litigation. The state’s last major hurricane was Michael in 2018.
“It’s a catastrophe of a different kind,” Mr McCarty said of the rising cost of reinsurance and the resulting decline. Any rate increase would “severely affect Florida homeowners given the staggering inflation in the broader economy.”
Insurance regulators typically require Florida-focused carriers to purchase reinsurance to ensure they can make good on claims. These insurers, along with the state-backed insurer of last resort, have constituted the bulk of the Florida home-insurance market since most of the large national home insurers pulled back in 1992 in the wake of devastating Hurricane Andrew.
Several carriers that sell reinsurance, including AXA XL and . Are included
American International Group Inc.,
AIG 2.98%
According to Fitch Ratings, disaster risk has been reduced to limit volatility in earnings.
Axis Capital Holdings Limited,
AXS 2.13%
Meanwhile, property reinsurance as a whole is going out of business. others, such as giant
SREN 0.24%
Businesses in particular have reduced in Florida because they believe prices are too low.
Randy Fuller, a managing director who heads the Florida segment for the Guy Carpenter reinsurance-brokerage unit
mmc 0.07%
He calls it “the most challenging market” the industry has seen in 18 years. “Market conditions are driven not by a lack of reinsurance capital, but by a reluctance to risk that capital in Florida,” he said.
Renaissance Re Holdings Limited,
RNR 0.51%
Chief executive Kevin O’Donnell said, “The past five years have largely taken a backseat because “even the best underwriters with the most sophisticated models can’t afford unreliable fraud and an aggressive test bar.”
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Suspicious claims often include roof damage that homeowners claim is from wind or hail. The carrier’s engineers and adjusters often treat this as a normal wear and tear. Industry executives say Florida law allows much easier access to legal fees paid by insurers in claims disputes, and it encourages contractors to prosecute businesses and lawyers.
The contractors and plaintiffs’ lawyers accused the insurance companies of exaggerating the role of fraud in their poor financial results.
Florida state lawmakers have approved measures in recent years aimed at curbing litigation. Lawyers for the plaintiffs argue that such moves could harm consumers by limiting legal recourse against insurance companies. Regulators and insurance companies say lawsuits have been pouring in so far. The latest measures were approved in late May.
The backdrop for reinsurers is five years of high worldwide devastation that has hurt their consequences, including rapidly spreading US wildfires, an unusually deep cold in Texas and widespread European flooding. In addition to Michael in 2018, Florida absorbed landfall from Irma in 2017.
Some reinsurance officers are concerned about bigger and more frequent disasters. Of these, Axis Chief Executive Albert Benchimol said the company’s exit from asset reinsurance was partly driven by “the impact of the increasing impacts of climate change”. He added that the company sees “more consistent profitable results and less earnings volatility” in other insurance lines.
Write to Leslie Schism leslie.scism@wsj.com
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