Floridians to bear the cost
Another assessment is expected on Florida’s property insurance companies and their policyholders from the latest insurance carrier insolvency, while yet another company has its credit rating and outlook downgraded. Plus, Florida’s largest property insurance company says it’s making progress avoiding lawsuits, even as the number is up, including those involving Assignment of Benefits cases. It’s all in this week’s property insurance news.
FIGA Update: The Florida Insurance Guaranty Association (FIGA) Board of Directors met again last week to ease pressure off insurance companies facing that 1.3% ($312 million) assessment it made the week before to pay for claims from the recently insolvent St. Johns Insurance Company. Instead of payments in full due April 30, FIGA’s board is now offering quarterly assessments. It’ll front the money through a loan, possibly through Florida’s State Board of Administration. But FIGA warns another assessment of up to $70 million may be needed to cover the insolvency of Avatar Insurance. All of these assessments will be passed along to policyholders, with industry predictions that more insolvencies – and assessments – are on the way.
Carrier Downgrade: AM Best last week downgraded the credit rating and outlook for Florida Family Insurance and its subsidiary Florida Family Home Insurance Company, one of the state’s 52 domestic property insurance carriers. While the long-term issuer credit rating just dropped slightly (from “bbb+” to “bbb”) and its financial strength rating remains at “B++”, AM Best revised its outlook for both from stable to negative.
Citizens Lawsuits: Citizens Property Insurance Corporation, Florida’s taxpayer-backed insurer of last resort, had a policy count of nearly 800,000 as of February 28 (up from 443,533 policies two years ago) and forecasts 1 million policies by year’s end. With more policies in force come more lawsuits. Citizens says new lawsuits in 2021 numbered 10,085 (about 878 per month), a third more than in 2020. That includes almost 2,000 new suits from 2017’s Hurricane Irma. Assignment of Benefits (AOB) cases represented 31% of those 2021 lawsuits, a 14% increase compared to 2020. The trend is continuing, with new lawsuits filed in January 2022 up 41% from those in January 2021. The bright spot: Citizens claims chief Jay Adams reports the carrier’s litigation avoidance strategy is working. Despite rising policy count and lawsuits, its legal spend payouts have remained relatively stable or decreased. Those claims disputes that went into appraisal last year resulted in settlements less than the plaintiff attorney demanded in 75% of the cases. Nevertheless, Adams says it’s “too early to tell” what effect SB 76 reform is having on the carrier.
Third-Party Litigation: Global reinsurer Swiss Re is warning of the dangers and need to reform third-parties helping fund lawsuits. Its new report calls for more transparency as up to 57% of awarded costs go to lawyers and funders – not to the plaintiff. The result is an “opaque, bottom-up wealth transfer from consumers to sophisticated investors, and a less-efficient legal system, paid for through higher prices and insurance premiums.” Verisk is also analyzing the impacts of this trend, with its Follow the New Money Trail. Mark Popolizio, its Vice President of MSP Compliance and a lawyer, writes that “it’s an issue that certainly warrants monitoring in 2022,” in his latest update. A bill (HB 41) to regulate litigation financing in Florida was withdrawn on the eve of this year’s legislative session.
Legislative consultant Scott Johnson provides some very pertinent historical background on how we came to what he describes as this “tipping point” and how fragile Florida’s homeowners insurance market truly is right now in his latest blog.
(Editor’s Note: An earlier version of this story mistakenly stated that the FIGA assessment for St. Johns Insurance Company was $190 million.)
LMA Newsletter of 3-14-22