ORLANDO, Fla. – As the peak of hurricane season approaches, Florida continues to be coping with a property insurance crisis.
More than 400,000 Floridians have had their insurance policies dropped within the final two years and the common premium has greater than doubled.
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Tom Cotton, proprietor of Hugh Cotton Insurance in Orlando, sat down with anchor Justin Warmoth on “The Weekly” to interrupt down the impression a serious hurricane would have on the struggling market.
“The impact it will have will depend upon the severity of the storm and the duration of the storm,” Cotton mentioned. “A significant storm — a Wilma, Andrew, something like that — it could put several carriers in peril.”
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There are quite a few causes for the crisis, however Cotton says the principle driver has been extreme lawsuits from roof repairs.
In 2019, Florida accounted for simply 8.16% of all owners’ claims opened in opposition to insurance firms within the U.S. However, 75% of the nation’s lawsuits in opposition to carriers have been filed by Floridians.
“If your roof is destroyed by a hurricane, regardless of how old it is, you’re still entitled to a new roof,” Cotton mentioned. “The problem is these people cruising neighborhoods saying, ‘Let me inspect your roof. Oh, you have some storm damage.’ They then go to the weather data center in South Carolina, plug in the address and roll it back until a super cell goes over. They use that to get you a new roof.”
Carriers in Florida shelled out greater than $1 billion in underwriting losses in 2021, along with paying out claims. As a outcome, 5 carriers that have been working within the state have gone below this yr and quite a few others have stopped writing new insurance policies.
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“The government regulates insurance companies with premium-to-surplus ratios,” Cotton mentioned. “If their premium is growing, their surplus has to grow. The surplus has been depleted because of the crazy litigation, so they have to bring their premiums down. Otherwise, they become financially in peril.”
Gov. Ron DeSantis known as a particular session of the Florida Legislature in May to move insurance reforms after the state’s main rankings company, Demotech, warned of downgrades to roughly two dozen firms.
“What they created was a RAP (Reinsurance to Assist Policyholders) program, which would prevent a catastrophe,” Cotton mentioned. “If Demotech downgraded the carriers, the real estate market would shut down, the mortgage lending market would shut down, and we would be in a real crisis.”
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Lawmakers primarily handed a backstop the place the Florida Insurance Guaranty Association, or FIGA, gives extra reinsurance the carriers won’t have been in a position to buy or won’t have been in a position to afford when their reinsurance treaty is renewed.
Companies can even have entry to Citizens Insurance capital — a state-run insurer that covers greater than 1 million insurance policies.
“It’s a temporary fix to prevent the crisis of a downgrade,” Cotton mentioned. “Citizens was not intended to be a solution or a destination. It’s intended to be a market of last resort that is not competitive with the private market.”
Watch the complete interview within the video participant above.
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