Florida Insurance Warning Issued Amid Growing Fears of a Crash
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Florida Insurance Warning Issued Amid Growing Fears of a Crash

State Rep. Hillary Cassel warned in a television interview this week that Florida lawmakers need to take action to address the state’s property insurance crisis before a major hurricane hits late in the season.

“It’s not a matter of if, it’s a matter of when,” the Democrat told Local 10. This week in South Florida. “We have to make some big changes here in Florida,” added Cassel, a lawyer who previously worked for insurers.

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Florida homeowners are grappling with skyrocketing insurance premiums as the state faces an ongoing crisis caused by a perfect storm of excessive lawsuits, widespread fraud and the growing risk of more frequent and destructive extreme weather events fueled by climate change.

Florida Insurance Warning Issued Amid Growing Fears of a Crash
A girl rides a bike in Founder’s Square in Babcock Ranch, Florida, December 5, 2023. State Rep. Hillary Cassel warned that efforts to depopulate Citizens will not be effective.

MARCO BELLO/AFP via Getty Images

The risk of a surge in claims in the state that could quickly erode company profits has led to something of an exodus in the past few years, with several private insurers operating in Florida discontinuing coverage in some of the most disaster-prone areas or pulling out of the state altogether.

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

Despite recent attempts to transfer some Citizens policies to private insurers because of concerns about financial exposure if the state were to be hit by a major hurricane, the insurer of last resort still has the largest number of homeowners policies in Florida.

As Citizens pursues a “depopulation” program aimed at helping 500,000 homeowners find insurance on the private market, the insurer of last resort has recently seen an increase in policy volume as hurricane season begins.

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Under Citizens’ depopulation program, a private insurer can take on one of the policies as long as its premium represents a 20 percent or less increase over its own renewable premium. Cassel said that strategy doesn’t do enough to address the affordability problem that plagues Florida’s property insurance industry and will only lead to Citizens being repopulated in the future.

“This allows, to some extent, lawmakers to pat themselves on the back and say, ‘Look, we’re doing our best to depopulate the Citizens.’ But at what cost to consumers?” Cassel said at 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 the law … that says what happens the next year. If that rate goes up and goes above that 20 percent, what’s going to happen? Those people are going to go back to Citizens,” Cassel added.

“We’re actually pushing the problem a little bit further because when they start pricing, they’re not going to stick with that excess carrier that might have 30 percent, 40 percent, 50 percent — they’re going to go back to the Citizens policy,” Cassel said of the insurer of last resort.

Cassel said the Florida property insurance market, especially ahead of a potentially devastating hurricane season later this year, needs more independent agencies to rate insurers in the state — especially small, national carriers that are not currently required to be rated.

Cassel added that it would help homeowners “better understand how solvent these companies are.”

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

“Forecasters have predicted this will be an exceptionally strong hurricane season, and record-breaking Beryl suggests they are right,” Collier said. “The season is just starting, and that’s causing a lot of concern in places like Florida.”

Collier, like Cassel, fears that a major hurricane this season could “destroy some of the small insurance companies in the state.”

“Small insurers often serve lower-income homeowners. If an insurer goes bankrupt, the state has a fund that will handle claims against its policyholders. But it can take a long time—months, even years—to pay out a claim through that state fund,” Collier said.

“It’s a big challenge for people trying to rebuild their homes. Some smaller insurers are luring customers with lower rates, but in my opinion it’s not worth the extra risk. If you’ve just been through a hurricane, the last thing you want is to have to jump through hoops to get a claim.”