“High degree of uncertainty” remains
A new report by regulators shows that the Florida property insurance market in the first quarter of 2023 had net positive income for the first time in seven years with net underwriting losses also encouraging. However, the gap between the cost of claims and reserves is growing worse. The report also includes first-ever aggregate property claims and litigation data as required now by the Florida Legislature.
The Florida Office of Insurance Regulation (OIR) Property Insurance Stability Report, produced in January and July each year, shows:
- Encouraging results in industry profitability following seven years of net negative income. Q1 Net Income was in the positive (about $60 million) compared to the almost $900 million net income losses in 2022. Q1 Net Underwriting Losses were about $50 million (compared to 2022’s $1.4 billion in losses).
- Adverse loss reserve development (cost of claims greater than reserves allotted) is growing worse. 2021 claims were $337 million more than originally estimated at the two-year look back. In 2022, claims were approximately $224M more than estimated after one year, and $772M at the two-year mark. “These numbers reflect the high degree of uncertainty which exists in the property insurance market, which in turn impacts reinsurance capacity and reinsurance rates for insurers,” says the report.
- Legislative reforms from 2022 and 2023 still have not impacted lawsuits filed (the LSOP & NOITL statistics points):
- Personal Residential Legal Service of Process (LSOP) filings were up in the first quarter of 2023 (about 6,500) from the last quarter of 2022 (about 4,700);
- Property Insurance Notice of Intent to Initiate Litigation (NOITL) filings nearly doubled to 8,486 (as of 5-31-23) compared to 4,284 in November 2022;
- Domestic Homeowners Defense Cost & Containment Expenses fell slightly in 2022 ($2.96 billion) from 2021 ($3.08 billion);
- Plaintiff attorneys’ rush to file lawsuits from March 17-22, 2023 before the Governor’s March 24 signature on HB 837 (Civil Remedies legislation) ballooned the Personal Residential Civil Remedy Notice of Insurer Violations filed to nearly 2,800 per month at the time compared to 1,500 in November 2022.
- Average homeowners and condominium premiums increased from November 2022 to March 2023 in all counties reporting data.
- Citizens Property Insurance continues to gain market share in both homeowners multi-peril policies (from 14.84% to 17.63% of the market) and homeowners wind-only policies (from 74.48% to 76.01% of the market). Citizens Condominium Unit Owners Multi-Peril policies increased from 7.62% to 9% of the market.
- The amount of reinsurance purchased by carriers in 2022 increased an average 17% from 2021 but the cost increased by 52%. Homeowners insurance rates will rise because of this drastic reinsurance cost increase. Figures for 2023 won’t be available until next month.
From Florida Office of Insurance Regulation, July 1, 2023. Click here to enlarge image
This report has a first-ever section titled “Property Claims and Litigation Data Call” starting on page 8, reflective of the new annual data calls that began January 1, 2023. It’s based on a total of 678,986 unique claims closed during calendar year 2022 but OIR cautions the data is preliminary and still being validated and clarified across carriers. The average claim indemnity was $15,330 and the average loss adjustment expense as $2,156.
As of March 28, 2023 the top five drivers of claims in Florida were hurricanes (283,542), windstorm or hail (148,118), water (79,350), accidental discharge or water overflow (77,862), and “all other perils” (73,926). The report includes figures on sinkholes and other specific perils.
LMA Newsletter of 7-10-23
