Florida special session on property insurance ‘unlikely to alleviate immediate financial pressures,’ agency says | Florida News | Tampa

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Financial rating agency AM Best said Friday that changes passed in a special legislative session last month “should not alleviate the immediate financial pressures” on Florida property insurers.

A three-page commentary highlighted, in part, insurers struggling to purchase reinsurance, which is crucial relief coverage for such things as hurricane claims.

“With an active hurricane season on the horizon, AM Best believes that the current legislation – while a step in the right direction – does not provide significant immediate relief,” the commentary reads. “Pressures remain for market participants, particularly those struggling to fully place their reinsurance programs ahead of what is expected to be another active hurricane season.”

A key part of the legislation provided $2 billion in tax dollars to provide additional reinsurance to insurers who otherwise could not purchase it in the private market. In addition, legislators have called on insurers to pass on savings resulting from reinsurance assistance to policyholders.

AM Best’s commentary said the $2 billion program “indicates a significant commitment of financial support from the legislature” but added that it “does not fully address pressures on reinsurance capacity “.

He also said that passing reinsurance savings on to policyholders might not help insurers struggling with financial losses.

“The rate reduction requirement may provide some relief to consumers, but it does not address rate mismatch issues related to loss costs outside of reinsurance pricing,” said AM’s commentary. Best.

Governor Ron DeSantis called the special session after widespread issues that included homeowners losing coverage and seeing rates skyrocket. Lawmakers passed two bills (SB 2-D and SB 4-D), which were quickly signed by DeSantis.

Along with the $2 billion reinsurance program, the legislation addresses claims and litigation related to roof damage, which insurers have long accused of driving up costs.

For example, one of the bills will allow insurance policies to include new deductibles for roof damage. The deductible amounts would be 2% of the total insured value of the houses or 50% of the roof replacement costs. For example, the 2% deductible on a $300,000 home would be $6,000.

In addition, the bill imposes new restrictions on so-called “bad faith” lawsuits against insurers and makes it more difficult for plaintiffs’ attorneys to receive “contingent fee multipliers,” which can significantly increase the amounts paid to lawyers.

AM Best’s comment stated that “if the changes are implemented as intended, potential long-term positive effects are possible for roof claims, litigation, and attorneys’ fees.” But he also stopped short of concluding that the changes would fix the problems.

“The ultimate effectiveness of these reforms will depend on the response of those who have already taken advantage of the system,” he said in a section of the commentary on the litigation-related changes.

AM Best’s assessment was somewhat similar to comments made this week by President and CEO of Citizens Property Insurance Corp. Barry Gilway, who said it will take time for many changes to creep in a path through the insurance system.

Gilway said he hoped the changes would “stabilize the market” and mainly pointed to the $2 billion in reinsurance money. But Gilway added that most insurance-based legislation doesn’t have “real impact” until it goes through the full insurance policy cycle, “which, as you know, is at least 16 to 18 months”.

“So nothing immediate,” said Gilway, whose state-backed insurer has seen its customer numbers soar as they struggle to find coverage in the private market.

It’s unclear how many property insurers struggle to purchase adequate reinsurance. But Kin Interinsurance Network has finalized its reinsurance for the period until May 31, 2023,

“Despite a home insurance market that continued to tighten, we successfully completed our reinsurance program,” Angel Conlin, director of insurance at Kin, said in a statement prepared Friday. “This is testament to our strong relationships with our reinsurance partners who have helped us bring our unique underwriting approach and steadfast commitment to protecting policyholders in the capital markets.”

Meanwhile, Universal Insurance Holdings, Inc. announced this week that its subsidiaries, Universal Property & Casualty Insurance Co. and American Platinum Property and Casualty Insurance Co., have terminated their reinsurance.

“In an environment of far-reaching macro-economic pressures globally and an extremely challenging property insurance and reinsurance market, particularly in the markets we serve, we were able to secure the extensive program of reassurance we wanted for the 2022 hurricane season,” Matthew J Palmieri, president of United Property & Casualty, said in a statement.

– News Service writer Jim Turner contributed to this report.

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