Ian brings more damage to Florida’s already volatile insurance market

The Florida real estate insurance market was already in jeopardy. Then came Hurricane Ian.

The massive storm that hit Southwest Florida producing catastrophic winds, rain and floods is likely to further damage the state’s insurance market, which has been strained by billions of dollar losses, delinquencies and skyrocketing premiums. .

The extent of the storm’s destruction will become clearer in the coming days, but there are fears that it may exacerbate existing problems and burden a state insurance program that has already seen a steep rise in policies as homeowners struggle to find coverage in the market. private.

“The Florida real estate insurance market was the most volatile in the United States prior to the formation of Hurricane Ian and will most likely become even more unstable in the wake of the storm,” said Mark Friedlander, director of communications at the Insurance Information Institute.

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The private insurance sector has lost more than $ 1 billion in each of the past two years, and hundreds of thousands of Floridians have undergone or not renewed their policies. Average annual premiums increased to over $ 4,200 in Florida, three times the national average.

Brenda Brennan is sitting next to a boat she pushed into her apartment when Hurricane Ian swept through the area on September 29, 2022 in Fort Myers, Florida. (Photo by Joe Raedle / Getty Images)

More than a dozen companies have stopped writing new policies in the state, and many have closed this year. One company was filed insolvent and placed in receivership this week as Ian was heading to Florida.

Homeowners unable to get coverage or off-plan pricing have flocked to the state’s public insurer of last resort, Citizens Property Insurance, which surpassed 1 million policies this summer for the first time in nearly a year. decade. Citizen Property Insurance was created by the state legislature in 2002 for Floridians who were unable to find coverage from private insurers.

Regulators and state insurers have long blamed homeowners’ lawsuits as the main culprits of the state crisis. They say state law makes it highly profitable for lawyers to sue insurance companies even if the amount won is relatively small. In the last half of 2010s, Florida accounted for about 8% of all homeowners ‘compensation claims in the United States, but nearly 80% of all homeowners’ lawsuits against insurers. in the United States, according to a letter from the state’s Office of Insurance Regular.

In May, as hurricane season approaches, the state legislature met for a special session to address the insurance crisis. In three days, with little government grants or expert analysis, lawmakers passed sweeping legislation with bipartisan backing that many in the state chamber saw as a significant first step to repair the market.

Among the provisions was the creation of a $ 2 billion reinsurance program in which insurers could purchase to insulate themselves from risk, as long as they cut rates for policyholders. The law offers grants of up to $ 10,000 to renovate homes, so they are less vulnerable to hurricane damage. It also moves to limit the various legal fees in insurance-related cases.

Even so, Florida’s leading rating agency Demotech threatened downgrading to about two dozen companies this summer. But concerns about their solvency faded slightly after Governor Ron DeSantis’ administration agreed to allow the state to support insurers.

DeSantis, during press conferences before the storm, noted that complaints about flooding could be one of Ian’s main problems.

RELATED: Florida sees significant flooding, water bailouts after Ian drenched the state

Home insurance policies, including those in Citizens, do not include flood coverage, which is managed under a federal program and is a separate issue from the insurance market. Federal government-backed flood insurance is generally mandatory for mortgaged homes in flood zones, but people who own the entire home sometimes refuse to get it and is less common in areas not usually prone to flooding.

“We are looking into a lot of flood compensation claims,” ​​the governor said when asked if the claims could outweigh citizens’ property insurance. “I’m not saying there won’t be a lot of wind damage, I mean it’s a hurricane, so chances are you’ll see it.

“There’s more I want to do in terms of wind insurance and that’s going to be something we’re going to take care of. I mean, at the end of the day we have to make sure people take care and then we’re going to do it, whatever we have to do.”

DeSantis, at a press conference on Wednesday, said citizen property insurance should be in good shape even after Hurricane Ian claims, as the state-owned company has billions of dollars in surplus. A Citizens spokesperson said he estimates 225,000 compensation claims and $ 3.8 billion in losses from Ian, though he noted that those projections were made before the storm came to land and would likely change as the damage. is fully valued.

“Their model, based on paying a lot of money in requests for it, was that they would still have between 4 and 5 billion in surpluses. So they consider themselves able to resist that,” DeSantis said.

Watch: Firefighters break the car window to save a woman from Ian’s floodwaters

More than 2.5 million people in Florida were subject to mandatory evacuation orders when Ian landed Wednesday afternoon as a Category 4 hurricane. Some residents fled their homes, hoping for minimal damage upon their return.

“I just don’t see the benefit of sitting in the dark, in a warm house, watching the water come into your house,” said Tom Hawver, a Fort Myers handyman, who evacuated his home on Wednesday. “And I can’t do anything about the wind or the water, so I’ll go back in a couple of days and evaluate.”

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