Growing concern about Fla’s property market
The other shoe dropped this past week on Florida’s property insurance market. Following marked declines in net underwriting and net income loss, ratings firm Demotech revealed that more than a dozen Florida insurance companies are facing ratings downgrades over the next three months or so.
Ratings Downgrade: The Insurance Journal reports that Demotech’s review of third-quarter financial reports from the 40+ Florida carriers that it rates raised concerns in nearly half of them. They quote Demotech President Joe Petrelli as saying as many as 18 out of the 40 or so…“will not produce a level of pre-tax profitability consistent with sustaining a Financial Stability Rating at the A level nor position themselves to do so in the near term.”
Petrelli cites many of the same factors we’ve shared in past newsletters here. Competition, including from Citizens Property Insurance, is keeping rates low. Reinsurance costs are rising and there’s loss creep from Hurricanes Irma and now Michael. Also – aside from backlogged Assignment of Benefits cases – litigation has become more expensive, due to an attorney fee multiplier, approved by the previous state Supreme Court in 2017. It allows judges to consider a plaintiff attorney’s contingency risk and award fees of up to three times the routine Lodestar fee. It’s also been harder for companies to attract investors.
Marketplace Realities: Looking at 2019 Q3 reports of property insurance companies writing in Florida, there’s lots of year over year net underwriting loss and net income loss, impacting Florida domestic and legacy carriers alike.
Two carriers (Florida Specialty & Windhaven) have failed in recent months. Others are seeking rate increases of up to 30% to stem rising reinsurance and litigation costs. One of them (Edison Insurance) noted that 20% of its water claims are filed by public adjusters or attorneys.
The Sun-Sentinel took note, publishing a balanced story, including quoting some of my testimony at the Edison rate hearing last month (also available on this YouTube video we shared last week – “Viewer Discretion Advised”).
“Why on earth would others be filing claims other than the homeowner if it wasn’t driven by the need for fees — and greed? We’re out of control in this state. Double-digit rate increases are going to happen again.”
Marketplace Reaction: In response to all of this news, the Federal Association of Insurance Reform (FAIR) last week issued a Florida Homeowners Insurance Market Update, expressing “deep concern.”
“Absent substantive legislative reforms to fully curb market distortions specific to Florida, significant double-digit rate increases will become commonplace, adversely impacting every aspect of Florida’s otherwise vibrant economy.
FAIR noted that under certain circumstances, policies issued by downgraded insurers may not comply with federally backed mortgage requirements. “This may also result in policies being transferred to government-owned Citizens Property Insurance Corporation, which is not a great option for the state or policyholders,” the update noted.
State Senator Jeff Brandes (R-Pinellas) tweeted it’s “the most underreported issue going into session is the rapidly declining condition of Florida’s insurance market.” His bill, SB 914, would eliminate the contingency risk multiplier in plaintiff attorney fees (see Bill Watch in this newsletter).
To those of you who have commented on the YouTube video, you are soldiers in your own right! My resolve in 2020 is to expose these crooks for who they are and do all I can to put consumers on offense instead of defense. I look forward to talking with each of you for ideas and strategies. Thanks again for taking the time to read, watch and listen!
LMA Newsletter of 1-13-20