Property Insurance Analysis

A financial-rating agency said it was “cautiously optimistic” about the Florida market, in part due to 2022 legislative reforms and declining Citizens’ policies.

TALLAHASSEE, Fla. — With a potentially volatile hurricane season ready to start, the AM Best financial-rating agency released a report Thursday that said Florida’s property insurance market is showing signs of improvement — but that time will tell.

The report said AM Best is “cautiously optimistic” about the Florida market, in part because of an overhaul passed by lawmakers and Gov. Ron DeSantis in 2022 that included trying to shield insurers from costly lawsuits. Other factors include a decrease since September in the number of homeowners getting coverage from the state’s Citizens Property Insurance Corp.

“While still too early to declare a win in the Florida personal property market, the signals look promising,” the report said. “The legislative reforms and declining Citizens’ policies in force mark a step in the right direction. Time will tell if favorable market results will continue and effectively managing hurricane risk is an ongoing challenge.”

AM Best analysts and industry officials largely echoed those conclusions during an online discussion held Thursday by the rating agency. They also cited issues such as improved profitability of insurers and a stable market for reinsurance, which is critical backup coverage in Florida’s hurricane-prone market.

“Let’s hope this is sustainable into the future,” said Dave Newell, vice president of membership and industry relations at the Florida Association of Insurance Agents and one of the speakers during the online event.

Homeowners have faced soaring rates in recent years and, in many cases, have gotten dropped by their insurers as the industry grappled with financial problems. The AM Best report said premiums doubled for typical homeowners.

“With more frequent and severe weather-related losses in recent years — including Hurricane Ian in 2022 and non-named storms — carriers have seen material volatility in both their operating results and (financial) surplus levels,” the report said. “To combat these market challenges, carriers needed significant rate increases. The average Florida homeowners policy premium doubled, increasing 102% in just the past three years, according to the Insurance Information Institute. In 2024, a slightly positive signal to the market has emerged, with a handful of companies nearing rate adequacy filing rate reductions, albeit marginally.”

Along with higher rates, the problems led to explosive growth at Citizens, which was created as an insurer of last resort but has become by far the largest property insurer in the state. Citizens had as few as 420,000 policies in 2019 but grew to 1.4 million in September 2023.

That number has gradually decreased through a “depopulation” program designed to shift policies into the private market. As of last week, Citizens had nearly 1.19 million policies.

State officials this spring have touted improvements in the market. As an example, the Florida Office of Insurance Regulation this month said at least eight carriers had filed for rate decreases in 2024, while 10 had filed to keep rates flat. It was not clear how many of the more than 7.4 million residential policies in the state would be affected by the decreases.

The AM Best report said that while “there are signs of stabilization, sustaining these improving market conditions will be critical.”

A big test could come during the six-month hurricane season that will start Saturday. Forecasters, including from the National Oceanic and Atmospheric Administration, are predicting a busier-than-average season, in part because of warm ocean waters that can fuel punishing storms.

The AM Best report, while describing improved signs in the industry, noted that Florida was hit in 2023 by only one hurricane, Idalia, which did not go through heavily populated areas.

“With the National Oceanic and Atmospheric Administration forecasting a higher frequency of named storms for 2024, it will be a good test for Florida insurers to see if these favorable results are sustainable,” the report said.

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