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Florida's property insurance market faces multiple challenges ahead of special session

Buildings on Sanibel didn't fare well in the storm surge of Hurricane Ian.
Thomas James for WGCU/NPR
Buildings on Sanibel didn't fare well in the storm surge of Hurricane Ian.

A former state senator who started a petition urging lawmakers to meet this spring to work on fixing Florida’s troubled property insurance market is advocating for reforms from the sidelines ahead of another special session on the issue later this month.

“It's the most urgent pocketbook problem facing Florida today,” said former Republican state Sen. Jeff Brandes, who represented part of Pinellas County until he reached his term limit after the November election.

Newly retired from the legislature, Brandes, who continues to work in real estate, says he plans to start a think tank that focuses on several key issues facing the state, including property insurance.

“This is the Achilles’ heel of the Florida real estate market. This is the Achilles’ heel of Florida’s growth,” Brandes said. “If Florida doesn’t get this right, then what you’re going to do is cut the middle class in the state because people will not be able to afford homes.”

Florida homeowners who’ve bought property insurance through the private market have seen annual rate increases of about 33% — with that number expected to rise to 40% next year. More than a million policy-holders are insured through the state-backed insurer of last resort,
Citizens Property Insurance Corporation, which offers rates at least 20% below market value.

Private insurance companies face tough market conditions, including excessive litigation and fraudulent claims. As a result, six insurers have left the state this year, with more than a couple dozen on the brink of insolvency.

“I saw this quickly becoming the number one issue in my community [that] my constituents are facing,” Brandes said.

State lawmakers will meet in Tallahassee Dec. 12 - 16 to pass more legislation aimed at fixing the state’s troubled property insurance market, which took another blow after Hurricane Ian made landfall in September and destroyed thousands of homes. In October, Gov. Ron DeSantis called for a special session and signed an executive order providing property tax relief to residents recovering from the Category 4 storm.

Republican House Speaker Paul Renner recently hinted to reporters that lawmakers are open to considering a range of possible solutions aimed at repairing the state’s broken property insurance market. “We're going to look at the kitchen sink, frankly, of options.”

The Republican supermajority in the legislature will likely face tough choices when it comes to the rising cost of reinsurance, Renner suggested. “When you have a market that is that is challenged, I think it's fair to say, you have to consider things that I as a conservative would not wish to do, which is put up some of our reserves to backstop the private market.”

Renner explained that such a move would only make sense alongside more permanent solutions, such as passing new legislation aimed at reining in the disproportionately high number of lawsuits filed against insurance companies in the state.

As insurers leave the market, homeowners are paying more for coverage.

Six private insurance companies have left the state so far this year, and more than a couple dozen others are on the brink of running out of funds, according to the state's Office of Insurance Regulation.

The Insurance Information Institute, a nonprofit organization that researches industry trends, estimates rate increases will only get higher, explained Mark Friedlander, the institute’s Florida spokesman.

“And there’s a variety of factors there: the continuing issues of litigation abuse and roof claim abuse, combined with Hurricane Ian losses, combined with the higher cost of reinsurance.”

Data from the state’s Office of Insurance Regulation shows 76% of the nation’s homeowners’ lawsuits against insurance companies are filed in Florida, yet the state accounts for 8% of all claims in the U.S.

Friedlander says the insurance industry wants lawmakers to end what’s known as “one-way attorney fees” which property insurance companies are required to pay anytime they lose their case.

"Florida is very liberal when it comes to those fees compared to other states," Frieldander said. "As a result, once again, it's an incentive to sue insurers, which we don't have in other states because of much stricter regulations.”

Friedlander says last year there were 116,000 lawsuits filed in Florida against insurers. That estimate for this year is 130,000 — but that was before Hurricane Ian.

With so many lawsuits in the pipeline, the market is unlikely to stabilize anytime soon even if lawmakers put an end to one-way attorney’s fees later this month.

“Any changes in the laws will not impact any lawsuits that have already been filed," Friedlander said. "Sometimes lawsuits could take several years to play out in the court system, so nothing is going to change immediately.”

House Speaker Paul Renner recently told reporters that addressing one-way attorney’s fees is a possibility. “That’s in the sink of things we're going to discuss,” Renner said. “I don't think any decisions have been made, but it's certainly one that people point to as Florida being a bit of an outlier in how we operate there.”

Former state Sen. Jeff Brandes expressed confidence that lawmakers will put an end to one-way attorney’s fees when they meet in the coming session. “They don't have a choice.”

"There's a bunch of stuff that needs to be done with Citizens,” Brandes said. “There's a bunch of stuff that needs to be done with the private market, but unless you deal with litigation, none of it matters, okay.”

When they met in the last legislative session, they failed to correct the many problems facing the market, especially when it comes to ending one-way attorney’s fees, Brandes explained.

“They frankly, didn't do enough,” Brandes said. “They knew what they needed to do, but they were unwilling to because of politics and because of an election year to do the things necessary in order to truly fix the market. They no longer have that option to wait and to punt. They have kicked the can so far down the road, we're out of road.”

Florida’s state-backed insurer of last resort is growing at a rapid pace. 

Another big issue lawmakers could address is the growing number of homeowners getting their coverage through the state-backed insurer of last resort: Citizens Property Insurance Corporation.

Since January, citizens’ policy count has grown by about 48%. The state-backed insurer of last resort has added more than 360,000 new policies this year, pushing the total over a million.

Former state Senator Jeff Brandes says Citizens rates typically fall below 30 - 50% of market value, depending on where a piece of property sits.

“The big problem Citizens has is that it's a predatory competitor,” Brandes said. “Their prices are not set by actuaries. They're set by politicians.”

Capping the rapid growth of new Citizens policies is among the issues that lawmakers must address to help the market.

And Brandes says the problem is so big and so complex that he doubts lawmakers will have time to fully address it during the week-long special session.

“I just don't know that the legislature is gonna be able to tackle all of these things in one week in a way that they need to. There's just so much.”

Brandes says he expects lawmakers will try to tackle the biggest issues later this month, but he says they’ll need to follow up with more solutions when they meet again in March for the 60-day regular session.

“This patient is very sick and needs multiple surgeries in order to survive.”

Valerie Crowder hosts and produces state and local newscasts during All Things Considered. Her reporting on local government and politics has received state and regional award recognition. She has also contributed stories to NPR newscasts.