Florida needs ‘immediate, substantive’ property insurance reforms: AM Best  – International – Insurance News

AM Best has raised the possibility of further insurer insolvencies in Florida’s troubled property insurance market unless “immediate and substantive” long-term legislative reforms are introduced. 

The rating agency aired its concerns as the state’s legislators prepare to sit for a special session this week to address the worsening insurance crisis after Hurricane Ian left estimated insured damage of $US35-55 billion ($51-80 billion). 

Six insurers have been declared insolvent since late February and Ian – a Category 4 storm that pummelled the state in September – will add to existing cost and capacity pressures. 

“Public policy initiatives need to consider how to make Florida attractive to national insurers and reinsurers, to incentivise them to expand their appetite for Florida risks,” AM Best Director Industry Research and Analytics Sridhar Manyem said. 

“Absent that, a lack of competition may continue to fuel affordability issues for primary insurers with respect to reinsurance and consumers in need of basic homeowners’ coverage.” 

AM Best says the previous special session in May did not go far enough to tackle the insurance crisis although the provisions agreed to by legislators were “somewhat positive”. 

Florida has had to rely on small, in-state insurers as most private players are reluctant to underwrite risks due to the state’s extreme vulnerability to hurricanes and other weather events. The state’s litigious landscape has also turned off many larger national insurers. 

AM Best says the state is now dependent on Florida-focused specialist insurers, which often have weaker balance sheets and are overly dependent on reinsurance for balance sheet protection and short-term capital. 

“The combination of a Florida’s catastrophe exposures in a highly litigious environment has resulted in a very high-cost homeowners insurance market for the state’s residents, and the higher-risk environment needs to be considered to ensure there are dollars available to pay insurance claims,” the rating agency says. 

“Without changes to reduce the costs in the system and to better manage the impact of catastrophes, Florida specialist carriers may find it difficult to survive.” 

According to AM Best, reinsurers had been drastically reducing property catastrophe exposures in the state even prior to 2022 and may continue to pull back from the Florida property market or further increase pricing significantly, making reinsurance reach the limits of affordability. 

“AM Best views long-term solutions as the only way to attract large national players, as well as new capital, back to the market in earnest,” the rating agency says. 

“However, carriers are unlikely to take such a step until necessary reforms have taken hold, and once prevailing rates are sufficient to cover the risks they must bear.” 



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