Florida’s Property Insurance Crisis Needs a Comprehensive Solution

You’d think heads of state would choose their words more carefully when addressing the only property insurance rating agency that stands between our insurance crisis and a real collapse of the housing market. Insults won’t win you friends or sway people, let alone create more affordable insurance options.

Last month the Demotech, Inc.., an Ohio-based financial ratings firm, said it would downgrade 17 private insurers operating in Florida. The move prompted a strong backlash from state leaders, including counterproductive complaints to federal mortgage agencies about Florida’s only homeowners insurance rating agency.

In his letter to Fannie Mae, Freddie Mac and the Federal Housing Finance Agency, Florida Chief Financial Officer Jimmy Patronis, called Demotech, Inc. “a red rating agency”, playing “havoc in the financial lives of millions of Floridians”. This, from a guy who seems more interested in bashing President Biden and the IRS than finding a solution to a crisis that threatens the state’s housing market and the economy at large.

Critics against Demotech may have bought the state time. The ratings agency postponed its originally planned downgrades, but the complaints from the state’s chief financial officer do not really replace a comprehensive policy aimed at keeping property insurance viable and affordable.

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In 2019, Floridians paid $1,988, the average premium for home insurance. Today, it’s $4,231, according to an analysis by the Insurance Information Institute. P&C insurance companies that still offer home insurance continue to be threatened with liquidation. Therefore, Citizens Property Insurance Corp.the state government-backed “last resort” insurer, is rapidly becoming the only viable option.

“When the market is healthy, Citizens get smaller as private companies take advantage of good market conditions,” Citizens spokesperson Michael Peltier told Post reporter Hannah Morse. “When the market is going through a tough time, we grow.”

As the state faces the climax of another hurricane season, the stakes couldn’t be much higher. Homeowners who rely on federally backed mortgages need top-notch insurers to meet the insurance requirements of Fannie Mae and Freddie Mac. Lower ratings typically force policyholders to pay more for new coverage, especially for homeowners whose homes are paid for through federally backed mortgages.

Governor Ron DeSantis Calls Special Session to Address Property Insurance Crisis

Governor Ron DeSantis.

Certainly, Governor DeSantis called a special session of the Florida legislature to deal with the crisis. The result was more money set aside for reinsurance to help struggling insurers, a move that was reinforced this month when the Florida Office of Insurance Regulation announced plans to put in place an agreement. temporary reinsurance through Citizens Property Insurance Corp., to fortify insurers during the current storm season.

The arrangement meets an “exception” that allows struggling insurers to obtain reinsurance, money that would allow them to provide coverage and meet the requirements of federally backed mortgages. Unfortunately, the exceptions won’t help much if Demotech is forced to do more downgrades or leave Florida altogether.

Worse still, the state’s efforts to deal with the crisis have not appeased the insurance industry, which still sees climate change and ongoing litigation as factors that make Florida a risky place to do business. business. The special session that produced bills that favored the insurance industry over consumers was met with a collective “meh” by the industry.

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It’s not like the state didn’t see it coming. The big insurance companies that offer bundled home and auto insurance policies in other states abandoned Florida years ago, leaving homeowners here with smaller companies that may be willing to take the risk but who need more help getting reinsurance from the State of Florida to do so. .

“I really think the only way to approach property insurance is with national catastrophe insurance similar to what the federal government did with flooding,” the state senator says.. Lori Berman, D-Delray Beach told the Editorial Board of the Post. “I hope the reassurance Band-Aid will work but I’m not convinced.”

Whether the solution is market-driven or government-run remains to be seen. But so far the only plan seems to be to hope we don’t have a hurricane.

If heads of state, like Patronis, are seriously considering addressing property insurance, they better take a more proactive approach with industry and the appropriate federal agencies. It is clear that simply reacting to events does not work. Complaining about the latest rating agency in place won’t help either.

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