Bills Don’t Fix Florida’s Insurance Crisis, Panel Told

June 2, 2022, Law360 – Lisa Miller, Florida’s former deputy insurance commissioner and now a private insurance consultant, suggested insurers access state reserves in the Florida Hurricane Catastrophe Fund. She described the CAT fund’s function to that of an accordion, meaning it should expand and contract with the market.  (Original story location:

Florida’s insurance market problems weren’t completely resolved by recently signed property insurance bills, a majority of panelists said in a discussion held Thursday by the state’s top rating agency, with one attorney for insurance companies acknowledging that “Rome wasn’t built in a day.”

Fred Karlinsky of Greenberg Traurig PA, who represents insurers and reinsurers, told a panel held by Demotech Inc., which rates the majority of Florida’s domestic insurers, that there was a “false hope” that something significant would get done at the special session. But he said the issues were identified.

Florida lawmakers have a lot on their plate, said Karlinsky, who made the Rome quote, but they have recognized that the Sunshine State faces many man-made problems that have been exacerbated by fraud. Those problems stem from a so-called roofing scam and lawsuit abuse, he said.

Demotech President Joseph Petrelli hosted the panel Thursday, asking a group of experts across many areas of the insurance industry for their thoughts on the bipartisan legislationsigned by Gov. Ron DeSantis intended to address concerns for insurance carriers and skyrocketing insurance costs to consumers.

‘Lack Of Insurance Knowledge’

State Sen. Jeff Brandes, R-St. Petersburg, said the Legislature felt it has done a lot over the last couple of years, but in reality it hasn’t done enough to get investors back into the market. There is a lack of knowledge among lawmakers on how insurance and reinsurance work, he said.

“It’s the time between the thunder and lightning,” Brandes said, explaining that it isn’t known when the next natural disaster will hit the Sunshine State or the impact it will have on the insurance industry.

Florida lawmakers passed two key property insurance bills — Senate Bill 2D and Senate Bill 4B — at a special session last week. The standout elements of SB 2D for the panel were a $2 billion reinsurance program and litigation reform efforts targeting one-way attorney fees and assignments of benefits.

SB 2D created the Reinsurance to Assist Policyholders, RAP, to allow Florida carriers to tap into a $2 billion pool. The bill also placed restrictions on the use of attorney fee multipliers in an award and limited policyholders’ ability to assign benefits to a third party — two areas blamed for the state’s hostile legal environment.

Karlinsky called the bills the start of some of the strongest reforms in the state but said it’s irresponsible to suggest insurance rates will go down. He pointed to the Florida market’s struggle with inflation, higher valuations for homes and increased building costs as reasons for higher rates.

Reinsurers Say ‘Hell No’

Robert Ritchie, chief executive officer of American Integrity Insurance Group, described the reinsurance renewal process as the worst he has seen in his career. Responding to the Rome analogy, he said Rome has been burning for several years and reinsurers responded to the bills with a resounding, “Hell no.”

Ritchie said reinsurers don’t like one of the bill’s measures that requires primary insurers to cover old roofs and, as result, there aren’t as many insurance programs in place that are covering all perils.

Compared to previous years, reinsurers issued at most half the number of quotes for coverage to insurers, according to some members of the panel, with there being a lot of pull back by the reinsurance market. Reinsurance prices rise every year but panel members said the reinsurance market shouldn’t be surprised about the crisis hitting Florida.

Adam Schwebach, executive vice president and branch manager, Tampa, Gallagher Re, said what’s happening isn’t a one-year phenomenon so reinsurers’ response is a head scratcher. In 2022, some reinsurers’ “corporate mandate” was to not underwrite certain risks, according to Schwebach.

The panel looked at the benefits to establishing RAP and whether there was a better alternative.

Lisa Miller, Florida’s former deputy insurance commissioner and now a private insurance consultant, suggested insurers access state reserves in the Florida Hurricane Catastrophe Fund. She described the CAT fund’s function to that of an accordion, meaning it should expand and contract with the market.

‘Long Road Ahead’

The majority of the panel believed not enough was done on litigation reform, highlighting the assignment of benefits and one-way attorney fees as root causes of the litigation abuse in the state.

Both issues arise out of the so-called roofing scheme, which is described as a solicitation offer to homeowners. In a typical example of the scheme, a roofer asks to inspect a home’s roof for any damage following a storm. The roofer then tells the homeowners they can get the entire roof replaced at the home insurance carrier’s expense, and accepts an assignment of the policy benefits to cover the replacement.

Schwebach of Gallagher recalled a similar experience where he received a text message while watching a movie that asked about having a look at his roof. The person made a compelling case that could convince inexperienced homeowners their roof should be replaced, he said.

But the panel said the prevalence of this roofing scheme puts pressure on the insurance industry and causes rate increases. The litigation is out of control in Florida, the panel said, comparing it to other states that have put in place legislation combating one-way attorney fees. More litigation reform is needed, the panel members agreed.

Kevin McCarty, former Florida insurance commissioner and founder of Celtic Global Consulting, said it’s astounding how well the “bad actors” are reaching homeowners before insurers can have a conversation with them about a claim. And his concern is that the bills won’t have an impact for a year.

There are difficulties in getting a consensus by lawmakers on bills but McCarty said there is “a long road ahead” and the immediate concern should be on replacement business. There will be a lot of insurance companies making the difficult choice not to renew certain lines of business, he said.

“Don’t let perfect be the enemy of good,” McCarty said.

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