The Florida Senate issued its Interim Report 2011-104 on “Issues Relating to Sinkhole Insurance” today. The 46-page report includes a review of state laws and academic studies related to sinkholes along with an analysis of claims and costs and corroborating charts and tables. It also outlines recommendations to aid lawmakers in their deliberations.
The study was prompted by a significant rise in sinkhole claims in recent years and a call for the Legislature to address the problem. Citizens Property Insurance Corp., the state’s largest property insurer, saw sinkhole claims rise precipitously since 2006; its claims frequency more than doubled between 2006 and 2009.
The private market also has been impacted. According to the report, private insurers have “seen their sinkhole claims and costs rise by double and triple digit percentages over the past several years. Responding to a recent survey by the Office of Insurance Regulation, 211 property insurers reported that the total reported claims increased from 2,360 in 2006 to 6,694 in 2010, totaling 24,671 claims throughout that period. Total sinkhole claim costs for these insurers amounted to approximately $1.4 billion for the same period.”
According to the report, there are two basic directions the Legislature could take in addressing sinkhole coverage: 1) consider the sinkhole peril to be fundamentally an uninsurable risk, and establish a sinkhole repair program that by its creation would eliminate major cost drivers and help restore the solvency of the private market and Citizens; or 2) leave sinkhole coverage in the private insurance market, but make substantial changes directed at removing the current cost drivers.
The Florida Legislature convenes on March 8, when it is expected to take up the issue along with other property insurance issues. Related stories: Florida OIR Issues Sinkhole Report, Florida’s Sinking Property Insurance Market