This Sept. 10, 2017 file photo shows waves crashing over a seawall at the mouth of the Miami River from Biscayne Bay, Fla., as storm surge from Hurricane Irma impacts Miami. AP Photo/Wilfredo Lee

Hurricane Season 2021

By John Haughey/The Center Square

Two weeks into the 2021 hurricane season there have already been two named storms and Florida could see its first tropical disruption later this week when a disturbance now brewing in the southern Gulf of Mexico could dump between 7-10 inches in the state.

The threat of an active hurricane season after two relatively quiet years takes on even more alarm for officials because the state is insuring more than $173 billion – and counting – in private property as enrollment in Citizens Property Insurance Corp., the state-backed “insurer of last resort,” continues to swell.

According to newly updated figures on its website posted Tuesday, Citizens had 609,805 policies on May 31, up from 589,041 in April and 569,868 in March – an increase of nearly 40,000 policies in less than two months. Citizens added 100,000 new policies in 2020, topping a half-million for the first time since 2015.

Citizens had 463,247 policies on May 31, 2020, meaning enrollment has increased 32% in the last year.

“On a straight-line basis, we’re looking at 750,000 policies, assuming the current rate of about 5,000 net new customers per week,” Citizens President/CEO Barry Gilway told its board in May.

According to Citizens, it has written more than 5,000 policies with commercial property owners and more than 600,000 homeowner policies. Collectively, according to Citizens, ratepayer premiums total $1.4 billion to insure $173.4 billion in property.

Florida’s 6.5 million businesses and homeowners have been seeing their property insurers dump them when policies expire or are experiencing policy rate increases as high as 45% over the last year.

The state’s Office of Insurance Regulation (OIR) reports it has approved 105 property insurance rate changes in 2020, including 90 for increases and 55 for increases above 10%.

Several factors are spurring the property insurance rate hikes in Florida.

Most of the approximately 60 private insurers operating in Florida after it was abandoned early this century by large insurance corporations, are thinly capitalized and, therefore, influenced by “reinsurance” rates. Reinsurance is essentially insurance for insurers financed by hedge funds and other private capital.

After a decade without a landfall hurricane, 2017’s Irma caused $17 billion in damage and 2018’s Michael, $12 billion. Because of “loss creep” from the storms, reinsurers are demanding Florida policy renewals dramatically raise rates.

In addition, insurers cite excessive litigation as a significant cost-driver.

An Insurance Information Institute report documents lawsuits against Florida property insurers increased from 45,000 in 2018 to 150,000 in 2020, with roof-related claims increasing from 27,000 in 2013 to 85,000 in 2020.

According to January’s “Florida’s P&C Insurance Market: Spiraling Towards Collapse,” co-authored by Tallahassee-based James Madison Institute, about 6% of Florida homeowners insurance claims are in litigation, amounting to a “solid Cat 3 hurricane” in costs.

Gov. Ron DeSantis last week signed a reform package into law designed to mitigate litigation costs.

Senate Bill 76 slashes the time to file claims from three years to two, reduces attorney “multiplier fees” and allows insurers to cover only the depreciated rather than full value of replacing roofs more than 10 years old.

The new law also lifts the 10% cap on premium increases to 15% for customers of Citizens Insurance, a non-profit created by state lawmakers in 2002 to provide insurance to homeowners unable to acquire coverage.

Residents can purchase a Citizens policy if they cannot find private insurance or if a policy is 15% above Citizens’ offering.

In 2012, Citizens’ policy count swelled to 1.5 million with the state backing $10 billion in property insurance policies. A “depopulation” initiative to transfer policies – and liability – to private insurers whittled the count to a low of 419,475 in October 2019.

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