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By Jim Saunders<\/div><\/div>\n

A special legislative session starts May 23 to discuss property insurance issues from high reinsurance and litigation costs to insurers\u2019 rising rate requests. <\/span><\/span><\/span><\/p>\n<\/div>\n

TALLAHASSEE, Fla. \u2013 \u00a0The financial-rating agency AM Best said Monday that further \u201caction is essential\u201d to stabilize Florida\u2019s property-insurance market, as lawmakers prepare to grapple with the issue during a special legislative session this month.<\/span><\/span><\/span><\/p>\n

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.<\/span><\/span><\/span><\/p>\n

\u201cInsurance industry leaders in Florida have been warning that the current environment for those offering personal property coverage is on shaky ground, given the state\u2019s risks and litigiousness,\u201d the commentary said. \u201cEscalating 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.\u201d<\/span><\/span><\/span><\/p>\n

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\u2019s regular session on an insurance bill.<\/span><\/span><\/span><\/p>\n

It also came after three property insurers \u2013 Lighthouse Property Insurance Corp., Avatar Property & Casualty Insurance Co. and St. Johns Insurance Co. \u2013 have been declared insolvent since February.<\/span><\/span><\/span><\/p>\n

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 \u201csubstantial doubt with respect to its ability to continue as a going concern.\u201d<\/span><\/span><\/span><\/p>\n

FedNat said it had agreed to file a plan with the Florida Office of Insurance Regulation to demonstrate its \u201cability 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.\u201d<\/span><\/span><\/span><\/p>\n

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.<\/span><\/span><\/span><\/p>\n

\u201cOIR is working closely with FedNat to protect policyholders,\u201d Bakofsky said in the email.<\/span><\/span><\/span><\/p>\n

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.<\/span><\/span><\/span><\/p>\n

The AM Best commentary was titled, \u201cTroubled Florida Property Market Participants Under Immense Pressure.\u201d It said hurricanes have not been the \u201cprimary culprit\u201d in the insurance problems but cited other issues, such as reinsurance and litigation costs and large numbers of roof-damage claims.<\/span><\/span><\/span><\/p>\n

\u201cInsurers have responded with rate increases, underwriting adjustments and targeted non-renewals while avoiding more problematic areas of the state,\u201d the document said. \u201cDespite these initiatives, rate adequacy continues to challenge some carriers as they request rate increases, compounding rate actions taken in previous periods.\u201d<\/span><\/span><\/span><\/p>\n

Reinsurance, which is essentially backup coverage that insurers purchase, plays a critical role in the Florida market. Increasing reinsurance costs and concerns about availability are raising concerns in the industry, as reinsurance coverage comes up for renewal.<\/span><\/span><\/span><\/p>\n

\u201cFlorida property insurers may find full placement of their catastrophe reinsurance programs ahead of the upcoming renewal season a challenge,\u201d Chris Draghi, an associate director at AM Best, said in a prepared statement.<\/span><\/span><\/span><\/p>\n

Insurers also have blamed questionable, if not fraudulent, roof-damage claims for causing losses. That also has resulted in insurers declining to provide coverage for homes with old roofs.<\/span><\/span><\/span><\/p>\n

During a pre-hurricane season briefing with reporters Monday, Charles Nyce, an associate professor of risk management and insurance at Florida State University, said insurers do not want to sell insurance on homes with roofs that are more than 10 years old.<\/span><\/span><\/span><\/p>\n

\u201cI don\u2019t want to sound alarm bells too much, but I don\u2019t think you can look at the current state of the private-insurance market in the state of Florida and say that it is good,\u201d Nyce said. \u201cIt is a very fragile market that we have, extremely fragile.\u201d<\/span><\/span><\/span><\/p>\n

News Service Assignment Manager Tom Urban contributed to this report.<\/span><\/span><\/span><\/p>\n

Source: The News Service of Florida<\/span><\/span><\/span><\/p>\n<\/div><\/div>\n

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