Florida: Reforms encourage carriers, drive property insurance market improvement

The legislative reforms aimed at improving the property insurance market in Florida are increasingly seen as having a positive effect, with carriers increasing their appetite for writing in the state and analysts suggesting the benefits of the reforms could be significant over time.

As we reported earlier this year, data released on homeowners’ property insurance lawsuits had already showed a decline in litigation.

The CEO of insurer Universal had said last year that he felt the situation was improving thanks to the reforms, which he reiterated again in the firm’s latest earnings call saying that property insurance claims trends are definitely looking better in Florida.

At the same time, while the Florida property insurance market is seen as improving and recent legislative reforms are expected to ultimately drive more capital to support reinsurance for the Florida marketplace, some in the insurance-linked securities (ILS) industry have rightly highlighted that there is still likely to be a premium charged for capacity deployed to the state.

That’s a given, until we really see the full effects of the already enacted legislative reforms, as well as any additional property insurance or reinsurance measures taken in the still ongoing Florida session this year.

But, the underlying sentiment seems to be that Florida’s marketplace for insurance is getting healthier all the time and this is now even encouraging some carriers to write more business there again.

Case in point American Integrity, which we have learned is to begin offering more capacity by starting to write DP-1 Owner-Occupied policies, in all Florida counties the insurer is active in, again.

Yes, this will be restricted to policyholders with no lapse in coverage and no prior losses, but it is going to be available statewide, except in Broward, Miami-Dade, and Monroe counties we understand.

American Integrity has also expanded availability of HO-3, DP-3 and its Integrity Select policies in certain areas and zip codes in Florida, while also expanding short-term rental coverage statewide and making its flood endorsement more widely available.

But, most importantly, is how American Integrity explained its capacity updates, saying, “Recent legislative reforms aimed at both tackling abusive litigation practices in Florida’s property insurance market and increasing long-term certainty in Florida’s business climate have helped make this decision possible.”

Which is a glowing review for the lawmakers and will hopefully spur them on to make further improvements in the ongoing session.

We’ve heard similar stories of increased appetites at other primary carriers in Florida, although it seems the national companies are in the main still waiting for more evidence and perhaps to see what additional reforms the current legislative session may bring.

Another signal of improving conditions in comes out of insurer Progressive, which has also said that the Florida insurance reforms are benefiting the company.

The management of Progressive have said that recent reserve releases were specifically related to Florida and that the recent reforms are a positive for them and other insurance carriers operating in the state.

It’s worth noting that the equity analyst team at BMO Capital Markets estimates that the Florida insurance reforms could be worth at least a 5 point loss ratio improvement in 2024 for Florida portfolios of risk.

That’s a meaningful improvement and just the kind of buffer that might encourage more insurance and reinsurance capacity to the state of Florida this year.

The BMO Capital Markets analyst team said that some lawyers they have spoken with believe the benefit of the reforms could be even greater over time, as many of the reforms tackle litigation which has a long-tail.

But, for the benefits to already be so clearly showing that carriers are encouraged to deploy more of their capital into the state, shows that the Florida property market environment may have turned the corner and be on a steady path back towards becoming a much more functional marketplace.

Of course, no amount of legal reform can reduce the threat of loss, hurricane seasons and severe weather will continue to erode re/insurance capital in Florida over time.

But, there are some other signals of improvement, such as where it is being said that building codes in Florida are seen as a significant factor in reducing the potential insurance industry loss from hurricanes there.

All of which adds up to some interesting inputs for reinsurance capital providers decision-making, as to how much exposure to take on in Florida this year.

Should the evidence of improving conditions persist through the coming months, or become increasingly apparent, it does have the potential to elevate the appetite of capital providers for Florida risk and perhaps elevate the levels of competition at the June reinsurance renewals.

Read all of our news and analysis on the Florida insurance and reinsurance market.