OUR POSITION: The next big hurricane will be devastating to Florida's insurance industry but homeowners may not have to wait until then to pay the price.
The Florida Senate is pushing through a bill that could buffer what is expected to be a significant increase in property owners' insurance premiums. That's the good news.
The bad news was highlighted recently in a Tampa Bay Times story and that is Florida's insurance industry is hurting and the future is not bright.
The writing is on the wall - and it says our rates are going up. There is no other logical solution - other than dozens of companies going out of business the next time a hurricane makes a direct hit on our state.
In January, we wrote about the problem and suggested it would get worse. Well, it's getting worse.
There are more than a couple of problems driving the huge losses insurance companies are suffering in Florida. Two of them are litigation and re-insurance costs.
Reinsurance is the cost insurance companies pay to larger insurance companies to help them pay claims. This type of safety net is necessary when a hurricane hits Florida and a company's claims skyrocket. The reinsurance rates have gone up significantly.
Another issue we looked at in January is the problem with litigation. One big issue that stands out is the plethora of roofing companies and lawyers who are using litigation to get new roofs all over the state. There are even advertisements you may have seen that brag "we'll get you a new roof."
"I've never seen anything like what is going on with litigation," Jim Nolan, president of Nolan Family Insurance told us in January.
The Florida Senate passed a major property-insurance bill last week that targets excessive attorney fee awards, adjusts the claims filing deadline to within two years of a loss, and addresses widespread abuses in the roofing industry. The bill, of course, still has to have House approval and must be signed by the governor before it can begin to alleviate what promises to be increases in premiums.
Citizens Property Insurance Corp. - the insurer of last resort for property owners who can't get or can't afford insurance with private companies - is seeking a rate hike to raise its premiums closer, or higher, than other policies. It's doing so mostly in an attempt to shed a burdensome number of policies - but under the current scenario will likely see its number of policies increase.
The Tampa Bay Times' report contained data that was difficult to fathom.
For example, the newspaper reported that - in a year when no hurricane hit Florida - 56 Florida insurers lost a total of $1.57 billion last year. It was the fifth straight year insurance companies lost money in Florida.
Some insurance companies in Florida are walking a tightrope with the amount of money they have on hand to pay claims. According to the Times story, 56 Florida companies had $11.8 billion in surpluses - down from about $87 billion the year before. Obviously, if you don't have enough cash on hand when a catastrophe hits, you're in trouble. And that is what the fear is right now.
Florida has been lucky to have no bad hurricane hit since Irma in 2017 and Michael in 2018. Yet, insurance companies are still paying claims for those two storms, according to Nolan.
When you consider all this and add in the potential for rates going up due to new FEMA flood maps, there is no relief in sight for property owners in Florida.
The question is, how much? How much will rates go up and will it be so much that it rains on transplants' dream of retiring in a Florida economy that is accommodating to the average wage earner.
The Senate bill will be a good starting point to bring property owners some relief. Meanwhile, our advice is to budget for a hike in your insurance costs. It's inevitable.