Federal and state reforms necessary to address Florida’s residential insurance woes

·4 min read

Florida’s property insurance market has always been among the most complex in the country due to the catastrophic damage caused by hurricanes, but the industry’s downward spiral over the last several years has been particularly unsettling. So much so, in fact, that the state legislature will be convening a special session focused on home (but not condominium) insurance beginning Monday.

An article by the Miami Herald’s Ben Conarck recently chronicled how the horrific Champlain Towers collapse “has further inflamed an exodus of insurers no longer willing to underwrite policies in an increasingly risky Florida condo marketplace.” It noted that condominium associations are being forced to resort to the surplus market for less coverage at costlier rates.

“Condo associations are having a hard time getting their pre-Surfside policies renewed, forced instead to sift through estimates for less protective plans that cost twice as much, or higher. Those lucky enough to renew their policies are doing so at 30% to 50% premium increases,” according to Conarck’s expert sources.

They also indicate “[s]piraling costs and tighter restrictions in both the insurance and lending industries have led to a new fear that some particularly troubled condo buildings will be uninsurable. Companies are going to be demanding inspection and financial records — and even meeting minutes — to determine how much risk is in any given building.”

Indeed, some analysts are predicting that the state’s residential insurance market is nearing a total collapse. They point to the six property and casualty companies that offered homeowners insurance in the state but have liquidated since 2017, with two more that are in the liquidation process this year.

They also note that other insurance companies are voluntarily leaving the state, and many of those that are remaining are enacting stringent new eligibility requirements and declining to renew huge swaths of residential policies.

The state of Florida requires condominium associations to maintain adequate property insurance to cover damage from storms, wind and fire, and some associations’ governing documents stipulate further requirements for general liability and flood insurance.

Given these requirements, and the issues affecting the market, the state’s lawmakers should not shirk their responsibilities by ignoring the condominium insurance market after calling a special session to address the issues affecting single-family homes.

As with most problems of this magnitude, the solutions will probably require reforms at both the federal and state levels. Nationally, U.S. Rep. Charlie Crist (D-St. Petersburg) recently introduced the Fueling Affordable Insurance for Homeowners Act, or FAITH Act, to provide a federal backstop for catastrophic losses by issuing loans to state insurance commissioners for insurance costs over a set threshold. The bill has the support of the Federal Association for Insurance Reform.

It remains unclear as of the press time for this column what changes Florida’s lawmakers are considering for the special session, and if there are any more changes in store for state-sponsored Citizens Property Insurance. Last year, the state enacted several reforms to curb fraudulent claims and allow Citizens to implement larger rate increases, and it has applied for state approval for an 11% increase.

What is painfully clear is that hurricane season begins on June 1, and the precarious state of the property insurance industry in Florida may not be in strong enough condition to withstand the impacts of a major hurricane(s). The state’s lawmakers should take the opportunity that the special session provides to implement changes aimed at curtailing fraudulent claims, hardening homes and condominiums, strengthening the building code, adding engineering inspections, enhancing transparency, and partnering with private-sector lenders for loan programs to shore up aging buildings.

The problems facing Florida’s property insurance market will not be fixed with one simple solution, but an approach that combines a number of reforms, and includes both federal and state initiatives, will have the best chance at turning the tide and steering the industry in the right direction.

Nicole R. Kurtz is a shareholder with the South Florida law firm of Siegfried Rivera who is based at the firm’s Coral Gables office and focuses on community association law. She is a regular contributor to the firm’s association law blog at www.FloridaHOALawyerBlog.com. The firm also maintains offices in Broward and Palm Beach counties, and its attorneys focus on real estate, construction, community association, insurance and bankruptcy law. www.SiegfriedRivera.com, NKurtz@SiegfriedRivera.com, 305-442-3334.

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