Florida homeowners insurance rates are four times the national average. That’s not going to get better anytime soon.


Hurricane season officially begins Thursday. But no matter how many storms hit Florida this year, residents of the state are already struggling to get homeowners insurance.

National insurers have very little presence in Florida. Large insurers dominate more than half the market in the rest of the country. But in Florida, State Farm has about 7% of the market, according to the Insurance Information Institute, an industry trade group. No other major insurer has as much as 2%.

Meanwhile, the regional and local insurers left to provide coverage are in poor shape. Just over half of Florida-based insurers are on the state insurance regulator’s watch list due to their financial health. Six were forced to liquidate last year, another earlier this year. And to try to stay solvent, the remaining insurers are charging rates nearly four times the national average. Homeowners in the state pay private insurers about $6,000 a year, compared to a national average of $1,700.

The insurance industry insists that the state’s risk from hurricanes is only part of the problem, pointing to a legal system that it says promoted abuse of litigation and excessive claims.

“This is a man-made crisis,” said Mark Friedlander, a spokesman for the Florida-based Insurance Information Institute. The insurance industry pushed through and won a series of reforms aimed at curbing what it saw as abuse, but so far the outlook for insurers hasn’t changed, in part due to a spate of nearly 300,000 lawsuits the III says were filed. just before the law went into effect.

“That will cloud the market for years to come,” Friedlander said. “That volume of lawsuits will drive more of these regional companies out of business. The laws have changed. Market conditions have not changed. It’s still a mess.”

Florida’s location and low elevation make it particularly susceptible to hurricane damage. According to the National Oceanic and Atmospheric Administration, the Atlantic hurricane season is projected to be normal this year, with a 30% chance of an above-normal season and a 30% chance of fewer hurricanes than normal.

Last year was a bad year. Hurricane Ian last fall caused $114 billion in inflation-adjusted damage, according to NOAA, making it the costliest storm to ever hit the state and the third costliest in US history after Katrina in 2005 and Harvey in 2017.

But for the most part, Florida has done pretty well in recent years, with no hurricanes making landfall in the state from 2019 to 2021.

Much of the damage caused by hurricanes comes in the form of flood damage, which is not covered by private insurers but rather by the National Flood Insurance Program, a federal agency. But wind damage to homes and roofs is covered by homeowners insurance policies.

Trial attorneys dispute frivolous or fraudulent claims as the cause of the problem, blaming a lack of proper regulation of the insurance industry by the state.

“We have seen reform after reform. Insurance companies have been allowed to loot state profits in the form of overpaying executives and sister companies and defrauding policyholders,” said Stephen Cain, president-elect of the trade group representing Florida trial lawyers. “The home insurance crisis is a regulatory failure. If the market had been properly regulated during the good years, when there were no hurricanes, the predatory and undercapitalized companies would not have been carried away by the Florida owners while their executives plundered the profits.

Even Friedlander said the new limits on claims may leave some property owners unable to collect legitimate claims. But he said that to the extent that happens, “it’s because of the abuse that has gone on for so many years.”

The state offers an alternative to the private sector: Citizens Property Insurance Corp., which was created in 2002 as an insurer of last resort for those who couldn’t find coverage in the private market.

The only way someone qualifies for Citizens insurance is if the lowest quote they get from a private insurer is more than 20% higher than the Citizens quote. Their average policy is well below the private market: around $3,700. But that’s a state average.

In areas with a high risk of hurricanes, such as the Atlantic coast in South Florida, countywide averages for a Citizens policy range from $5,100 to $6,800. Still, in those counties it has a commanding share of the market: about 42% in Miami-Dade and 30% in Broward just to the north, along with 36% in Monroe County, which includes the Florida Keys.

And with affordable insurance from private insurers becoming harder to find, more and more Florida homeowners are turning to Citizens. It now has 1.3 million policies, around 16% of the market, and is growing at a rate of about 3,000 policies a month. The number of policies is up nearly 50% from this time last year. And that in itself represents a huge risk to the market.

The Citizens board admits that the premiums it charges are not enough to cover the risk it has assumed. If one or more major hurricanes make landfall on the Atlantic coast of South Florida, they could quickly deplete Citizens’ reserves and force it to impose emergency assessments not only on its policyholders, but also on other insurance customers across the state. . That could mean an additional 45% for current Citizens policyholders, according to III. Even those without Citizens policies could be hit with a 2% assessment on all their insurance premiums, both home and auto, if the financial setback is big enough.

Even without those assessments, Citizens is asking for a 14% rate increase to take effect later this year, which will be considered by Florida’s insurance regulator next week. And other insurers are also seeking hefty increases.

A big reason is that reinsurance companies, the companies that insurance companies turn to to cover some of their risks, are increasing their premiums by 30% to 40%, according to Matthew Carletti, an insurance industry analyst. from JMP Securities.

“If you’re a reinsurer, you’ve lost money over the last five years,” Carletti said. They have had enough.

Carletti said while recent Florida legislation should help the market, it won’t be enough to lower premiums, especially with concerns about increased risk from climate change and more powerful hurricanes looming. There’s also inflation that increases the cost of repairing or rebuilding homes, both because of increased labor costs and higher material prices.

“The reforms, at a minimum, should result in fewer increases than would be the case in Florida,” he said. “But prices and premiums are going up across the country.”