Hurricane Ian may bring Florida home insurance market to brink of collapse, analysts fear

As Hurricane Ian’s death toll in Florida rises to over 50 and rescue teams continue to assist victims, analysts are worried that the storm may bring about further destruction – specifically in Florida’s home insurance market.

Due to much of the state being in a disaster area, Florida was never a priority region for the nation’s largest home insurance companies – State Farm covers just 8% of Florida’s home insurance market, and no other major national insurer has more than 4% – and the home insurance market has typically been dominated by regional companies.

Faced with rising losses even before the hurricane, several dozen insurers stopped underwriting policies in Florida, while six insurers became insolvent altogether. Insurance companies have lost over $1 billion in each of the last two years and hundreds of thousands of Floridians have had their policies dropped or not renewed, while millions have seen their home insurance premiums rise to nearly triple the national average – $4,231 a year per policy, compared to a US average of $1,544, per CNN. 

In what has become the perfect storm, policy payouts resulting from Hurricane-related damages are sure to exacerbate the solvency issues Florida insurers are facing.

“Insurer of last resort”

Homeowners unable to get coverage or priced out of plans have been forced to turn to Citizens Property Insurance, the state’s public insurer and known as an insurer of last resort – a type of insurance company that offers policies to parties viewed as extremely high insurance risks.

Created in 2002, Citizens Property Insurance surpassed 1 million policies for the first time in nearly a decade this summer – 13% of the state’s market.

The state insurer is also facing acute risk as a result of the storm – not only because of the funds it will require to pay out policies and rebuild areas affected by Hurricane Ian, but also because Florida law makes it very easy to sue insurance companies. In the last half of the 2010s, Florida accounted for just 8% of all homeowners’ claims in the US but almost 80% of all homeowners’ lawsuits against insurers in the US, according to a letter from the state Office of Insurance Regular.

“There were 116,000 property claim lawsuits in 2021. We’re on pace for 130,000 this year, even before Ian,” The Insurance Information Institute's spokesperson Mark Friedlander told CNN. “In other states, you might see only a few hundred. California, which is much larger, had 3,500 last year.”

Fears of collapse

Florida Governor Ron DeSantis said Wednesday that Citizens Property Insurance should remain solvent even after claims from Hurricane Ian, given that the state-backed company has billions of dollars in surplus. In May, Desantis signed a bipartisan property insurance reform bill into law that poured $2 billion into a reinsurance relief program and $150 million into a grant program for hurricane retrofitting. 

“This is a problem that we’re going to continue to tackle. Clearly, there are other things legislatively that I’d like to see done,” DeSantis said at a press conference Monday, hours before the hurricane hit. 

President Joe Biden approved DeSantis' request for a disaster declaration for several Florida counties on Thursday. It includes grants for temporary housing, home repairs and low-cost loans to cover uninsured property losses.