Dominoes continue falling for insurance market

There will be no warmup laps for the new Florida Legislature as their first task following last month’s election is tackling a homeowners insurance industry in crisis.

State leaders formally announced Tuesday they would address the problem during a special session beginning Monday, Dec. 12. The move was widely expected after lawmakers’ attempts to stabilize the market in May didn’t result in much improvement.

Since that session, the destruction wrought by Category 4 Hurricane Ian has caused $10.3 billion in insured losses, and experts believe that amount will continue to climb. In a statement following the special session announcement, Florida Chief Financial Officer Jimmy Patronis called it an opportunity to fundamentally restructure state law.

“It (the session) also highlights the warped financial incentives that have made Florida number one in the country for property insurance lawsuits and number one in the country for insurer instability and rate increase,” said Patronis. “The sooner we do something to address litigation reform in the property and casualty market, the better.”

Speaking at a Suncoast Tiger Bay event Tuesday night, newly elected Rep. Lindsay Cross said the special session is her first task, “and it’s a really big one.” Photo by Mark Parker.

St. Petersburg

State regulators placed St. Peterburg-based United Property and Casualty insurance (UPC) into administrative supervision Monday, just a day before the special session announcement. In October, the insurer reported it received 19,000 claims immediately following Ian and estimated it would add another 30,000 more for a gross estimated loss of $1 billion.

UPC officials also reported a $173 million net loss in Q3 this year. According to the Insurance Journal, the company had 147,520 active policies at the end of September, down 26% from last year. In mid-November, an entity connected to Tampa-based investment advisory firm Third Lake Partners bought UPC’s St. Pete headquarters for $10.5 million.

Now amid an orderly runoff, the insurer planned to offer customers a 60-day cancellation notice. The Florida Office of Insurance Regulation’s (OIR) consent order will require 120 days’ notice.

The OIR order states that UPC must maintain staff to communicate with policyholders, submit customer service scripts for approval and that its agents must assist with transferring policies with other carriers. It also mandates that customers receive all unearned premiums by June 1, 2023.

“United has been unable to secure reinsurance commitments for the 2023 hurricane season,” reads the consent order. “The Company has no rating acceptable to the secondary mortgage market, and the Temporary Market Stabilization Arrangement terminates on May 31, 2023.”

Newly elected Rep. Lindsay Cross is one local lawmaker who will attend the special session. Her District 60 encompasses eastern Pinellas County from downtown St. Petersburg north to the Gandy area.

Following a Suncoast Tiger Bay event Tuesday night, Cross told the Catalyst that the House’s incoming representatives will immediately address “arguably the most important issue we’re facing as a state.” She added that the issue affects affordable housing and touches everyone’s lives.

“It is a big issue to tackle before we even start formal committee weeks,” said Cross. “But we can’t just continue to kick the can down the road and make small changes.”

While UPC is still solvent under the state’s watch, six other insurers were placed in receivership this year. Combined with losses continuing to pile up after Hurricane Ian, Cross believes stakeholders are now motivated to adopt more significant reforms.

She relayed her optimism that lawmakers can help alleviate some burdens on insurers and policyholders. Cross said the current focus on litigation, the financial climate and ensuring private insurers can remain in the market are all critical to addressing the issue.

However, as an environmental scientist, she also hopes state leadership recognizes the effect of warming temperatures and rising seas on the industry.

“There are short, medium and long-term things that we need to be addressing,” said Cross. “And I would say that climate change and addressing the causes of that has to be integrated all the way through.”

Citizens Property Insurance estimated losses from Hurricane Ian were between $2.3 and $2.6 billion in October. Photo by PA3 Gabe Wisdom/courtesy of U.S. Coast Guard Sector St. Petersburg.

The session

A proclamation from incoming Sen. President Kathleen Passidomo and House Speaker Paul Renner broadly outlined the five-day session. It states that lawmakers would consider legislation to reduce litigation costs, enhance reinsurance availability and improve property insurance claims handling practices, among eight other goals.

The agenda did not list anything related to climate change.

Lawmakers will also look to improve the financial stability of the Citizen’s Property Insurance Corporation. That includes reducing potential assessments for Florida’s insurer of last resort and fostering the transition of its policies to the private sector.

Mike Pelletier, a Citizens spokesperson, told the Catalyst in October that his organization now receives about 10,000 new policies weekly. Ideally, he said the state-subsidized insurer would hold about 450,000 policies.

According to his latest numbers at the time, Citizens underwrites two-and-a-half times that amount.

“And as the state’s insurer of last resort, that’s unsustainable growth,” said Pelletier. “You want those policies to go back to the private market.”

Other session agenda items include providing tax relief and financial assistance to hurricane victims, increasing support for the Division of Emergency Management’s recovery and relief efforts and establishing a statewide toll credit program for frequent state commuters.