After back-to-back-to-back hurricanes a decade ago, many insurers fled Florida, leaving homeowners with a few, expensive choices. Today, the market is much healthier, competitive and homegrown. The turnaround came through local entrepreneurship in cooperation with the state's legislature, governor, cabinet, Florida Office of Insurance Regulation (OIR) and rating agencies.
Floridians need a healthy property insurance market. So do the independent insurance agents who need to offer their customers a choice of markets to place their homeowners insurance. Without it, the housing and real estate industries, which employ hundreds of thousands and contribute billions to the state's economy, would come to a halt because buyers could not qualify for conventional mortgages. Loans would be expensive and hard to come by.
That was the danger after the hurricanes of 2004-2005, as millions of Florida homeowners received nonrenewal notices from their longtime insurers. Big-name insurance companies significantly downsized their Florida operations in rapid succession, leaving longtime customers scrambling for coverage.
Through the remarkable cooperation of the private sector, the legislature, and the Florida Department of Insurance Regulation (OIR), the homeowners insurance market bloomed in what had become a desertof no or limited availability. State-created Citizens Property Insurance Corp. helped homeowners acquire protection as private firms assembled the proper management, capital, reinsurance and licenses.
Now, Florida domestic homeowners companies insure approximately 55 percent of Florida homes through a strong network of independent insurance agents. Citizens' share of the market continues to shrink as premiums reach realistic levels and domestic insurers demonstrate that they can handle catastrophe events. Just as important, Florida insurers are heavily capitalized and well-reinsured, as reviewed by Demotech, Inc., which has been laser-focused on analyzing and rating many of the state's domestic insurers since 1996. Demotech recently cited nine "safeguards in place today that may not have existed years ago" that have significantly improved the sustainability of Florida-based insurers.
Florida domestic insurers currently have a combined surplus of $2.4 billion and carry first-event catastrophe reinsurance of approximately $20 billion. That translates into a true total claims-paying ability for a catastrophic first event in excess of $22 billion. Coverage for second and subsequent events has also been purchased.
If a catastrophic hurricane roughly the size of Hurricane Andrew were to hit Florida, insured losses would total about $10 billion. Because of their reinsurance resources, Florida domestic companies could pay all claims and have sufficient reinsurance to meet claims from a second Andrew-sized storm in the same year, plus additional catastrophes.
Would that scenario deplete Florida companies and their reinsurers, which provide back-up insurance? No. The reinsurers have an aggregate surplus (net worth) of approximately $570 billion. Neither they nor Florida domestic companies would be in danger of insolvency. Seen in this way, Florida's homeowners insurance market has never been in a stronger position.
The number of insurers competing for homeowners policies demonstrates the market's health, and new Florida companies are forming regularly. The regulatory environment has also improved, as state officials and the industry have worked together to control claims fraud in areas such as sinkhole coverage.
The FPCA was established in 1997 to represent Florida-based home insurers to foster and promote a healthy and competitive Florida insurance market. Through its lobbying and communications teams, the FPCA works to educate Florida lawmakers, regulators and homeowners on issues and policies that affect property and casualty insurance. The organization is recognized as a source for timely information on insurance legislation and regulation, as well.
The FPCA maintains a constant focus on the interests of Florida-based homeowners carriers while advocating on behalf of its members before the Florida Legislature, Florida Office of Insurance Regulation and the executive branch. Membership consists solely of Florida domestic homeowners insurers. Associate membership is also available to businesses that serve the needs and interests of the industry. We strive to take a proactive approach to creating and maintaining a stable and competitive marketplace for insurers, independent agents and homeowners alike.
William H. Stander is the Executive Director of the Florida Property & Casualty Association, an industry trade group comprised of Florida-based insurance companies. With more than 20 years experience advocating before state governments, media, and business and industry trade groups, Stander has a proven record of trusted, successful and aggressive representation on behalf of his clients. In his representation of the insurance industry, Stander has taken on some of the most complex and contentious issues and fighting some of the strongest political winds across the Southeast, including the tumultuous 2004 and 2005 hurricane seasons and their aftermath. He can be reached at (850) 212-3250 or william@williamstander.com.
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