AM Best: Florida Insurance Action ‘Is Essential’ To Stabilize Market
Palatka Daily News (FL)
TALLAHASSEE - The financial-rating agency AM Best said Monday that further "action is essential" to stabilize Florida's property-insurance market, as lawmakers prepare to grapple with the issue during a special legislative session this month.
The agency issued a four-page commentary that described a stew of problems for insurers, such as high reinsurance and litigation costs, and pointed to companies seeking hefty rate increases and reducing the numbers of policies they write.
"Insurance industry leaders in Florida have been warning that the current environment for those offering personal property coverage is on shaky ground, given the state's risks and litigiousness," the commentary said. "Escalating losses have prompted advocacy groups to call for legislative reform to stabilize the insurance market. Growing support led to legislation introduced in 2019 and again in 2021 aimed at lowering the runaway costs of litigation, a key driver of operating losses, but reform has not achieved the desired effect. Further action is essential to stabilize the market."
The document came three weeks before the scheduled May 23 start of the special legislative session, which Gov. Ron DeSantis called after the House and Senate could not reach agreement during this year's regular session on an insurance bill. It also came after three property insurers - Lighthouse Property Insurance Corp., Avatar Property & Casualty Insurance Co. and St. Johns Insurance Co. - have been declared insolvent since February.
Meanwhile, in an April 25 filing at the federal Securities and Exchange Commission, FedNat Holding Co., which has three property-insurance subsidiaries that do business in Florida, cited "substantial doubt with respect to its ability to continue as a going concern."
FedNat said it had agreed to file a plan with the Florida Office of Insurance Regulation to demonstrate its "ability to secure and maintain a financial strength rating acceptable to the secondary mortgage market, acquire sufficient reinsurance as of its July 1, 2022 renewal, support its existing business via the securing of additional capital and address its non-Florida losses and policies."
Alexis Bakofsky, chief of staff at the Office of Insurance Regulation, said in an email Monday that FedNat had filed the plan, which was not subject to release because it had been marked as a trade secret under state law.
"OIR is working closely with FedNat to protect policyholders," Bakofsky said in the email. It remains unclear what steps lawmakers will take during the special session, as many homeowners across the state get hit with rate increases or lose coverage.