Hurricane Ian worsens Florida's unstable property insurance market

Marcela Noyes received a nonrenewal notice from her property insurance carrier Sept. 28, the same day Hurricane Ian hit Florida's west coast as a catastrophic Category 4 storm with 155 mph winds and record storm surge.

It was nerve-wracking, the Stuart resident said. Though her policy is in effect through Dec. 31, she now has to navigate the tumultuous Florida property insurance market to find a new carrier — the second time she has had to do so this year.

Not only do Florida homeowners have to jump through myriad hoops just to get insured, but now prices are skyrocketing.

"That's just another thing you have to worry about. I have to go through the same thing I went through four months ago," said Noyes, 35, who lives in the Golden Gate neighborhood. "It was very upsetting. Now with the storm, it's probably going to be harder with more (carriers) dropping out of the Florida market."

Florida's already struggling property insurance market is likely to worsen in the wake of Hurricane Ian. Throughout the year, some carriers liquidated, others paused writing new policies and over two dozen regional companies were deemed to be in bad financial health by the Florida Office of Insurance Regulation.

Hundreds of thousands of Florida homeowners were left scrambling to find insurance coverage in the midst of hurricane season that began June 1. Up to 400,000 had been dropped or received policy non-renewal letters by mid-July.

Hurricane Ian property damage

Hurricane Ian may be Florida's most expensive natural disaster and the nation's second-most expensive, according to Boston-based catastrophe modeler Karen Clark & Co, which estimated over $60 billion in losses to privately insured property.

Hurricane Katrina, a Category 5 storm that devastated New Orleans in 2005, remains the costliest recorded, at about $90 million.

This preliminary data encompasses a few factors, according to Karen Clark's report:

Insured loss to residential, commercial and industrial properties and cars

Building, contents and time element losses

Privately insured loss from wind, storm surge and inland flooding

Estimated demand surge

Estimated impacts of excess litigation

More insurance carriers

could liquidate

These expensive property insurance claims and potential litigations will be detrimental to regional insurance carriers statewide, said Mark Friedlander, spokesperson for the Insurance Information Institute, a nonpartisan association that provides insurance education and research.

In July, the Office of Insurance Regulation put 27 Florida-based insurance companies on a "watch list" because of their financial issues. Industry experts were "very concerned" for the future of these carriers even before Hurricane Ian, Friedlander said.

"It's hard to predict" how Hurricane Ian will affect the insurance market, he said. "Most likely, there will be more failures of smaller, regional carriers. Based on what we're hearing, some of these insurers will not survive."

It's also possible more nationwide carriers will stop renewing or temporarily halt issuing Florida property insurance policies, Friedlander added.

Since January, 16 companies have announced policy moratoriums statewide. So far, no other carriers have made similar declarations since Hurricane Ian, Friedlander said.

Before Ian, there were already over 130,000 active property claim lawsuits — mostly from fraudulent roofing schemes, he said.

Unethical roofing contractors solicited homeowners, enticing them with a free inspection and offering to handle repairs directly with insurers. When insurers wouldn't pay for wear-and-tear, contractors would sue the carriers — and win. Insurers then had to pay for the roof repairs as well as the court costs.

More lawsuits are imminent.

Florida is a very litigious state, Friedlander said. Attorneys are already scouring Southwest Florida in search of property damage victims, he said.

"They're literally walking through neighborhoods. They're proactively approaching victims of Hurricane Ian, who are suffering probably the worst they've ever seen in their lives," Friedlander said.

Insurance premiums to increase

Florida homeowners should expect insurance premium increases, Friedlander said.

Though Florida already has the highest annual insurance rate — three times the national average, at $4,231 — homeowners are likely to bear the brunt of insurance carriers' additional expenses from Hurricane Ian.

On the Treasure Coast, here's the average insurance premium, according to the Office of Insurance Regulation's July Property Insurance Stability Report:

$4,373: Martin

$3,144: Indian River

$2,509: St. Lucie

Those who can't afford these skyrocketing prices turn to Citizens Property Insurance Corp., a tax-exempt, not-for-profit, state-regulated company the Legislature created in 2002 to cover those unable to find affordable policies in the private market.

Citizens, which holds over 1 million policies, saw a 29% increase in policies from January to mid-July. If Citizens' reserves are wiped out, Florida property owners could face multiyear surcharges on their private homeowners insurance policies.

Uninsured Florida homeowners

There is no way to know exactly how many of the roughly 400,000 Florida property owners facing policy nonrenewal this year did not have insurance when Hurricane Ian struck, Friedlander said.

It's believed "most" were able to find coverage, he said. In July, the Office of Insurance Regulation announced that Citizens would temporarily reinsure homeowners in the event carriers were downgraded or liquidated during hurricane season.

An estimated 12% of Florida property owners voluntarily do not have insurance and only 18% have flood insurance, he said.

"The primary driver behind that is the cost of insurance," he said, adding that homeowners insurance is required only if there is a mortgage loan on the property. "It's not required, so they're not going to pay for it."

There are federal initiatives, including the national flood insurance program and the Federal Emergency Management Agency's assistance programs, on which many residents may have to rely, said Florida Gov. Ron DeSantis.

President Joe Biden also promised federal aid would help cover insurance gaps for damaged homes, up to $37,900, in addition to another $37,900 for "lost property."

Florida property owners should not expect to see relief anytime soon.

That's despite new legislation in May that steered $2 billion of taxpayer money into a fund to help insurers:

Pay hurricane damage claims

Limit lawsuits against companies

Have homeowners shoulder more of the cost for roof replacements.

"It's a very treacherous market right now," Friedlander said. "We expect the market to be more unstable than it has been."

Catie Wegman is TCPalm's housing and real estate reporter. You can keep up with Catie on Twitter @Catie_Wegman, on Facebook @catiewegman1 and email her [email protected].