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Storms, social inflation continue to pressure Fla. homeowners insurance rates

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Storms, social inflation continue to pressure Fla. homeowners insurance rates

Steeper underwriting losses and ongoing high levels of claims-related litigation have led to double-digit increases in multiple rate filings for insurers within the Florida homeowners market.

In an S&P Global Market Intelligence analysis, 14 of the companies examined received at least a 10% increase in either their annual rate filing or a filing specifically related to the cost of reinsurance. The analysis was limited to select approved Florida's Homeowners Sub-TOI Combinations rate filings submitted between Jan. 1 and Nov. 5.

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Paul Handerhan, president of the Federal Association for Insurance Reform, said the rate hikes have been caused by an increase in the frequency of catastrophic storms and ongoing pressure from social inflation.

"The reason they're doing that is they're waiting for the rates to catch up to the costs, and they're not going to continue to write any new business until those rates catch up with the costs," he said in an interview. Handerhan said those factors have put the Florida homeowners insurance market in a "tenuous position" because insurers are restricting their underwriting and not taking on any new business.

Barry Gilway, president of Citizens Property Insurance Corp., the state's insurer of last resort, made a similar observation in a Sept. 23 report to Citizens' board of governors. He said six major companies had announced they were shutting down all new business in Palm Beach, Broward and Miami-Dade counties; the Central Western counties of Hernando, Hillsborough, Pasco and Pinellas; and the SOLO counties of Seminole, Orange Lake and Osceola.

The soaring level of litigation is a major driver in widening the gulf between rates and costs for Florida-focused companies like Citizens, according to Michael Peltier, the insurer's media relations manager. He said Citizens is being served with between 700 and 800 lawsuits each month and received more than 12,000 this year, as of Oct. 20.

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"We have seen our litigation rates climb over the last several years, and because we are a nonprofit corporation, those costs ... fall on the backs of the premiums for our policyholders," Peltier said in an interview.

The statewide numbers, according to an analysis by Johnson Strategies LLC, show that as of Sept. 30, property insurers have been served with 44,226 lawsuits in 2020. Including this year's tally, a total of 246,926 such lawsuits have been filed in Florida since 2015.

Admitted companies are trying to ease their costs by requesting double-digit rate increases. Capitol Preferred Insurance Co. Inc. received the highest annual rate increase filing of 26.2%. American Integrity Insurance Co. of Florida Inc. and St. Johns Insurance Co. Inc. got increases of 14.9% and 14.8%, respectively. Family Security Insurance Co. Inc., 14.5%, and Olympus Insurance Co., 14.2%, round out the top five annual rate-increase filings.

Among reinsurance rate-increase filings, First Protective Insurance Co. was granted a 14.4% increase. Also receiving double-digit hikes were Tower Hill Preferred Insurance Co. at 13.5%, Tower Hill Signature Insurance Co. at 13.2% and Tower Hill Prime Insurance Co. at 11.6%.

Those increases come as insurers in the Sunshine State also deal rising underwriting losses. In an S&P Global Market Intelligence analysis of 30 individual insurance subsidiaries with at least 75% of their total direct premiums written in 2019 coming within the Florida homeowners market, only four reported net underwriting gains during the second quarter of 2020. That marked the lowest total since the third quarter of 2017, when Hurricane Irma caused approximately $6 billion in damage.

The insurers in this analysis reported $68.5 million in net underwriting losses in the second quarter. Those companies have absorbed $602.3 million in losses since the fourth quarter of 2018.