March 31, 2023, S&P Global Market Intelligence – With litigation matters now addressed, attention should turn next to reinsurance, according to insurance consultant Lisa Miller, a former Florida deputy insurance commissioner. Miller said Florida-domiciled carriers “are struggling to purchase adequate reinsurance” ahead of the June 1 renewal season, which coincides with the start of the Atlantic hurricane season. Miller said the Legislature and DeSantis need to step in with “more state-sponsored reinsurance,” which Miller referred to as a “reinsurance bridge.” “It could reduce homeowners rates about 15% versus the 30%+ rate increases we are seeing on top of the 2022 increases,” Miller said. (Original story location: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/larger-fla-insurers-stand-to-benefit-from-new-tort-reform-law-74963456)
FLORIDA – Larger property and casualty insurers in the Florida market are likely to benefit from recently enacted tort reforms, and it remains to be seen how those changes will affect other carriers in the Sunshine State.
The Civil Remedies bill, signed into law by Gov. Ron DeSantis on March 24, is the type of legislation that insurers have been advocating for while navigating a litigation environment that DeSantis described as “a judicial hellhole.” The new law eliminates one-way attorneys fees and fee multipliers, changes standards regarding comparative negligence and modifies bad-faith rules when insurers are sued.
The changes bring Florida more in line with other states in dealing with claims, which Piper Sandler analyst Paul Newsome said is “a pretty significant improvement.” What is not clear is how to quantify that improvement, given that the changes focus on litigation issues, rather than how claims are handled.
“I haven’t found anybody who could give me a real number as to how big the improvement is,” Newsome said in an interview. “I think that’s still very much up in the air.”
Wait and see for smaller Florida insurers
While the new law is designed to aid the market as a whole, Newsome said the changes are a “straight-up benefit” for larger companies with a presence in Florida, such as The Progressive Corp., The Allstate Corp. and State Farm Mutual Auto Insurance Co.
“If you’re Progressive, Allstate or State Farm, or whoever, and you know you’re going to be there, you may not decide to grow your business, but at least it’s a profitability improvement in a state where they’ve lost a lot of money,” Newsome said.
However, it is possible that benefits can be realized for smaller companies such as Heritage Insurance Holdings Inc., United Insurance Holdings Corp., HCI Group Inc. and Universal Insurance Holdings Inc., as well as some privately run carriers that are “kind of on the edge,” Newsome said.
Speaking during a fourth-quarter 2022 earnings call, Heritage CEO Ernie Garateix said the company’s wait-and-see approach will remain unchanged until the new legislation impacts its financial results.
“I am cautiously optimistic that [the legislation] will accomplish the goals … to stabilize the Florida property insurance market and curtail abusive claim practices,” Garateix said.
Shares of United Insurance finished the week ending March 31 up 11.9%, while Heritage rose 4.07%, Universal slipped 0.16% and HCI fell 0.77%.
Allstate rose 4.94% and Progressive rose 1.33%.
The S&P 500 Insurance Index outperformed the broader market on the week, rising 3.85% to 561.92. The S&P 500 finished the week at 4,109.31, up 3.48%.
Reinsurance concerns remain
With litigation matters now addressed, attention should turn next to reinsurance, according to insurance consultant Lisa Miller, a former Florida deputy insurance commissioner.
In an emailed statement to S&P Global Market Intelligence, Miller said Florida-domiciled carriers “are struggling to purchase adequate reinsurance” ahead of the June 1 renewal season, which coincides with the start of the Atlantic hurricane season.
Miller said the Legislature and DeSantis need to step in with “more state-sponsored reinsurance,” which Miller referred to as a “reinsurance bridge.”
“It could reduce homeowners rates about 15% versus the 30%+ rate increases we are seeing on top of the 2022 increases,” Miller said.
The Florida Office of Insurance Regulation took steps to address that issue in 2022 when it established the $3 billion Florida Optional Reinsurance Assistance program. Miller said $3 billion “may sound like a lot, but it’s a small piece of what’s needed to [reinsure] all the risk in Florida.”
Newsome said the reinsurance issue ties in with relief promised by the litigation reform law because it is not clear whether reinsurers will give primary carriers credit for it in upcoming renewals. If those carriers are hit by large reinsurance rate increases, there will not be enough premium to go around, Newsome said..
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