Florida cited in NICB report
A new report says property and casualty insurance companies across the US paid upwards of an extra $9.2 billion in disaster claims because of insurance fraud last year. With hurricane season just a week away, Citizens Property Insurance has decided to use a combination of traditional reinsurance and pre-event catastrophe bonds. Plus a look at rapidly rising condominium property insurance premiums from a recent webinar of experts. It’s all in this week’s Property Insurance News digest.
Insurance Fraud: According to the National Insurance Crime Bureau (NICB), property and casualty insurers paid $4.6 billion to $9.2 billion extra in disaster claims due to insurance fraud in 2021, a cost policyholders bear through their insurance premiums. Its report estimates disaster fraud adds 5%-10% to the total claims paid following a disaster. Similarly, the FBI notes about 7.5% of the federal government’s $80 billion in reconstruction funding following Hurricane Katrina was insurance fraud.
The NICB report uses Florida as an example. “In Florida, contractor fraud is one element contributing to increasing premiums, insurer insolvency, and consumers scrambling under deadlines to find an insurer to meet mortgage lender requirements. In some instances, homeowners in Florida are signing with non-admitted insurers,” .
Citizens Reinsurance Cover: Florida Citizens Property Insurance Corporation Board of Governors last week approved a $400 million spend on risk transfer for the upcoming hurricane season through both traditional reinsurance and catastrophe bonds. The Board in March had debated four different staff-provided scenarios for buying from zero to $3.4 billion of risk transfer through traditional reinsurance vs. floating pre-event bonds and relying on company surplus to pay for any catastrophic events in 2022 (per our past newsletter) to prevent unnecessary spending. The $400 million will purchase an additional $3.64 billion of mid-year risk transfer that when combined with ongoing programs brings the total to $4.7 billion.
Citizens CFO Jennifer Montero warned that “the markets are in complete disarray” with reinsurance prices up 10%-30%, and that it will be “very unlikely” Citizens will be able to place 100% of its risk transfer program. It and many other insurance companies – and the reinsurance market itself – are watching closely what the Florida Legislature does this week in its special session on needed reforms, before proceeding with reinsurance.
Condo Coverage Crunch: I had the pleasure this past week in taking part in “The State of Insurance: Why Rates are Climbing, How to Plan and Budget for It, and What’s Next”, an hour-long webinar put on by KW Property Management & Consulting, which manages more than 90,000 homes through condo associations and HOAs. In a shocking revelation on just how bad the market has become, both Brendan Lynch of the Plastridge Insurance Agency and Richard Rodriguez of USI Insurance Services said they have dealt with condo associations that can’t find any coverage at all – despite these agents’ best efforts. The deadly Surfside condo last June has certainly contributed to this greater scrutiny by underwriters. Lynch said that even Citizens is not necessarily taking all the policies that come its way due to its own underwriting guidelines. (You can watch the webinar by clicking the above link and for more, see Lack of Capacity Hits Florida’s Condo Market from our last newsletter.)
Demotech Webinar: Demotech, the ratings agency for many of Florida’s domestic insurance companies, will hold a webinar recapping action taken during this week’s special session of the Florida Legislature. You can register for the June 2 webinar here, whose panel participants will include yours truly!
LMA Newsletter of 5-23-22
