The Florida insurance crisis demands more than talk and tantrums

Farmers Insurance, the latest underwriter to give up on Florida, is leaving some 100,000 policyholders in the lurch. It might appear that Tallahassee has failed again to stabilize a market as essential to homeowners as their mortgages and equity.

To hear Gov. Ron DeSantis tell it, Florida's new laws just need more time to show that they're working.

Also needed is a miracle: No major hurricanes this year.

Appearing on a conservative talk radio show to tout his presidential campaign, DeSantis said he thinks more insurance companies will invest in Florida after the hurricane season.

Knock on wood"So, knock on wood, we won't have a big storm this summer. Then I think you're going to start to see companies see an advantage," he said.

Despite record heat that has left surrounding oceans figuratively boiling, NOAA — a part of the Commerce Department that DeSantis promises to abolish — is predicting a "near normal" hurricane season for the nation's most exposed state. Normal has averaged a hurricane a year since 2016, including the catastrophic Category 4 Ian in 2022 from which southwest Florida has yet to recover.

Niños, like the one now developing in the Pacific, inhibit Atlantic hurricanes.

But they don't necessarily prevent them, and ocean heat fuels them. If DeSantis' wood-knocking fails, it might be obvious sooner than later that the new law making it harder to sue insurance companies and creating an optional $3 billion reinsurance program doesn't resolve other issues. Those include Florida's unique exposure to wind damage and rising costs of repairs.

Florida's homeowner insurance premiums are either the highest or second highest in the nation, depending on who's counting. They far exceed the national average and keep rising.

No mention of lawsuitsSignificantly, Farmers did not mention lawsuits in its letter notifying the state Office of Insurance Regulation that it would be limiting its exposure in Florida by dropping an estimated 100,000 of its branded homeowners, auto and umbrella policies. It said its affiliated companies would remain, preserving about 70% of its business in the state.

Insurance, although an absolute necessity for nearly everyone and a staple of the economy, is still a commercial business. As such, it is responsible to its stockholders for profits and to its policyholders for maintaining sufficient reserves. But there is no general duty to the public at large as there would be if it were regulated and guaranteed profits like electric and natural gas utilities do. No conceivable law would require a company to do business where it does not care to.

Insurance is also the only financial sector that federal law leaves exclusively to state regulation. The quality of that regulation varies.

DeSantis's reaction to Farmers' announcement was mature compared to that of Jimmy Patronis, Florida's chief financial officer, whose portfolio includes OIR, the Office of Insurance Regulation.

Patronis' tantrumPatronis accused the company of "woke" policies and "virtue signaling" that have nothing to do with its decision. ("Woke" is the new buzzword for anything that some Republicans don't want voters to like.)

The CFO said Farmers is "well on its way to becoming the Bud Light of insurance," implying that consumers should boycott it. He threatened to have his office of consumer protection investigate Farmers and drag it before the Legislature (which only legislators can do). He accused it of being ungrateful for the new anti-lawsuit laws.

When his hissy fit concluded, he hadn't said a word about seeing to a healthier insurance market by making new construction more storm-resistant, by restricting or banning reconstruction in more vulnerable locations, or by imposing pro-consumer, anti-price gouging restrictions on the cost of building materials in the wake of natural disasters.

Patronis worked in a family-owned restaurant in Panama City and was a member of the state House when then-Gov. Rick Scott appointed him to replace CFO Jeff Atwater, who resigned. Patronis had no special professional qualifications for the office other than the fact that he was one of Scott's earliest supporters.

The chief financial officer actually has little authority over the insurance market. The OIR is housed for administrative purposes in his Department of Financial Affairs, but Patronis has only one vote on the four-member board that appoints the director and oversees the OIR. The others are the governor, the attorney general and the commissioner of agriculture.

Michael Yaworsky, the new OIR commissioner DeSantis nominated, was relatively restrained in his letter to Farmers. He complained, reasonably so, that Farmers gave the state no opportunity to consult before announcing its decision. He also acknowledged that Farmers told him it was pulling back "across the country and not solely focused on Florida."

Echoing DeSantis' optimism, Yaworsky cited favorable signs since the new legislation of increased capacity and decreased cost in the reinsurance market and more interest in commercial companies acquiring policies from Citizens Insurance, the state-run carrier of last resort.

Farmers' announcement cited "catastrophic costs at historically high levels and reconstruction costs continuing to climb" as the reasons for a pause on writing new homeowners policies. It is hardly the first company to do so.

Since 2016, many other small companies have pulled out of Florida and 13 became insolvent. The problem is too broad and too deep for Yaworsky's polite rhetoric or Patronis' tantrums to solve.

An editorial from the South Florida Sun Sentinel.