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Florida lawmakers will meet Monday to complete a state takeover of Walt Disney World’s self-governing district and expand a migrant relocation program, key conservative priorities of Republican Gov. Ron DeSantis ahead of his expected White House run.

The session, three weeks ahead of the 2023 regular session of the Florida Legislature, will also consider a bill to provide more relief money for Hurricane Ian and Nicole recovery efforts.

Republican leaders of the statehouse, in coordination with DeSantis, have ordered the Legislature to convene in a special session to restructure the Reedy Creek Improvement District, as the Disney government is known, after Disney bucked DeSantis on his “Don’t Say Gay” law passed last year. The change could impact workers’ compensation insurance and benefits for Reedy Creek workers, particularly first responders.

The session continues a focus by DeSantis focus on social issues including sexual orientation, gender and immigration as the Republican governor exploits national political fissures on his path to a potential 2024 presidential run.

The meeting is the latest development in a high-profile feud between DeSantis and Disney over the company’s criticism of the law that bars instruction on sexual orientation and gender identity in kindergarten through third grade and lessons deemed not age appropriate.

The governor, in going after Disney, displayed a willingness to penalize one of the state’s biggest employers and political donors, reinforcing the combative leadership style that has propelled him to national political stardom and appeals to conservative primary voters.

The president of the Reedy Creek Firefighters Association, Jon Shirey, said last year that dissolving the district will end first responders’ lifelong health insurance paid by the district, along with complimentary lifetime Disney passes. Workers also have access to other perks, including a discount on Met Life auto insurance. Questions remain over whether a government control of the district will be more accepting of workers’ compensation claims.

During the early days of the COVID-19 pandemic, fire workers criticized Reedy Creek administration for fighting comp claims and time off for sick and exposed first responders. Eight firefighter/paramedics fell ill from the virus in summer, 2020, but the district denied the claims, forcing the men to burn through their personal sick time and vacation time, workers said.

Others, though, have said that at least some benefits will be left untouched if the Disney city goes away. Reedy Creek employees, like other municipal workers in the state, will likely remain part of the state employees retirement system.

The squabble between DeSantis and Disney began last year, when the entertainment giant publicly opposed the “Don’t Say Gay” education legislation and said it would pause political donations in the state and support organizations working to oppose the law.

DeSantis and other Republicans moved quickly to criticize the company, calling it a purveyor of “woke” ideologies that are inappropriate for children.

At DeSantis’ request, the GOP-dominated statehouse in April approved legislation to eliminate Disney’s Reedy Creek government by June 2023, beginning a closely watched process that would determine the structure of government that controls the company’s sprawling property.

The creation of the Reedy Creek district was instrumental in Disney’s decision to build near Orlando in the 1960s. Having a separate government allows the company to provide zoning, fire protection, utilities and infrastructure services on its land. The Reedy Creek model was once touted as a potential solution to some of Florida’s property insurance woes. In 2010, the Competitive Enterprise Institute argued that Disney had been able to survive several hurricanes without significant damage, partly because the district was able to set building codes at a level that made structures more wind resistant.

Lawmakers also are expected to create a program to transport immigrants who are in the country illegally to another state if they’ve already been processed by the federal government and if the migrants volunteer.

DeSantis had already used part of a $12 million fund, paid for by taxpayers, to fly about 50 South American migrants from Texas to the Massachusetts resort island of Martha’s Vineyard, bringing widespread condemnation.

Another proposal to be taken up during the session would make it clear the statewide prosecutor has authority to prosecute election fraud in federal and state races.

DeSantis, with statehouse backing, created an election police unit last year to investigate fraud and other crimes to satisfy what has become an important issue to conservative voters following the 2020 election. Some charges resulting from investigations by the election police force have been dropped because of jurisdiction issues.

The special session will also adjust language in current laws addressing endorsement deals for college athletes.

Florida was one of the first states to pass a law allowing college athletes to profit off their name, image or likeness, but it doesn’t allow people affiliated with universities to help secure endorsement deals. The proposal would lift that provision to make Florida more competitive with other states that don’t have the restriction.

Photo: A 2022 picture of the iconic entrance at Disney World. (AP Photo/Ted Shaffrey, File)

Copyright 2023 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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By William Rabb 

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Appeals Court Upholds Sanctions Against Florida Insurance Defense Attorney

By William Rabb | February 6, 2023

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A Florida appeals court has issued a sharp rebuke to an insurance defense attorney, upholding sanctions and charging that he has engaged in a pattern of conduct designed to trigger mistrials.

Dale Gobel, of Orlando, made “intentionally misleading and deceptive statements” in an auto accident case and utilized improper discovery procedures to obtain medical records, the 5th District Court of Appeal said in an opinion posted Friday.

The court noted that other judges have found that Gobel, of the firm Gobel Flakes, had engaged in misconduct. “Mr. Gobel has occasioned more mistrials in these two cases alone than most lawyers will have in an entire career,” the court quoted from a 2021 opinion by retired 5th DCA Judge Jay Cohen.

Gobel could not be reached Monday morning. His firm’s website shows that Gobel has litigated extensively in insurance defense, defense of personal injury claims and defense of first-party contract claims. The Florida Bar does not list any prior disciplinary actions against Gobel.

The case before the 5th District stemmed from an automobile accident in Brevard County. The first trial ended in a mistrial. Then the plaintiff’s attorney asked the trial court to sanction Gobel for “ongoing illegal conduct” that caused the mistrial. The judge agreed and struck the defendant’s pleadings in the case.

On appeal, Gobel asked the 5th DCA to review the sanctions. The appeal judges found that the trial court had sufficient evidence for sanctions and of Gobel’s misleading statements on his prior relationship with a physician witness. Gobel also served notice of intent to issue subpoenas then prematurely sent the subpoenas, the court said.

The lawyer also sought to obtain updated medical records without the plaintiff’s knowledge or consent. His office sent a letter referring to the need for “missing” records.

“As observed by our sister court, there is no authority for the proposition that discovery subpoenas are continuing in nature, permitting a treating physician subpoenaed once for records to continue to produce updated records to the party that subpoenaed him upon an informal, ex parte request,” the 5th DCA opinion reads.

The court noted, however, that it reversed the trial court’s order striking the defense pleadings in the auto-accident case. The judges said that the plaintiff’s attorney, Jeffrey Byrd, of Orlando, also had a significant role in causing the mistrial and and that he, too, has been cited by the court for unprofessional conduct.

“After giving due consideration to the trial court’s findings, but also giving consideration to the fact that both attorneys’ conduct contributed to the need to declare a mistrial in the first trial, we conclude that the trial court abused its discretion in striking Defendant’s pleadings,” the court said. “Instead, the trial court should have imposed sanctions directly upon the individual who it found had made ‘intentionally misleading and deceptive statements’ to the court and/or jury and who utilized improper discovery procedures.”

The court said it would be appropriate to require Gobel to pay attorney fees and witness fees in the case. The court remanded to the trial judge for a new trial on damages in the accident and to consider alternative sanctions. Judges Kerry Evander, Brian Lambert and Harvey Jay concurred.

TOPICS FLORIDA

By William Rabb 

Please call  Lee from  USAsurance Powered by WeInsure. 954-270-7966 or 833-USAssure at the office. My email is lee@myUSAssurance.com . I am Your Insurance Consultant  about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance, Mortgage protection, Financial Products, Business  & Commercial Policies, & Group Products for business owners to give Employees benefits at no cost to the employer.

Florida Citizens’ Endorsement Now in Effect: Disputes to be Heard by Admin Judges

By William Rabb | February 6, 2023

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As of this month, most Florida Citizens Property Insurance Corp. claims disputes will now be heard and decided by the state Division of Administrative Hearings, not in a court of law.

Officials at Citizens and at DOAH aren’t expecting a big influx of cases over the next few months, but they’re prepared if the numbers start to rise.

“We’ll hire more judges if we need to,” said Brian Newman, director and chief judge of DOAH.

That would probably require legislation. But for now, Newman is not too concerned about caseload after Florida lawmakers in December disallowed two big drivers of insurance claims litigation – assignment of benefits agreements and one-way attorney fees.

Before Senate Bill 2A was adopted, Florida property insurers took a number of steps to limit soaring litigation costs. One insurer now offers binding arbitration in exchange for premium discounts. Others have stopped writing roofs older than 10 years, to help avoid claims contending that wear and tear is storm damage.

Citizens’ plan to have administrative law judges hear cases was seen by many in the industry as a smart move after the state-created insurer was flooded with claims litigation in recent years. While Citizens was established by the Florida Legislature as an insurer of last resort, it has grown to be the largest property insurance carrier in the state, with twice as many policies as the next-largest carrier.

Newman

Citizens’ legal defense costs in 2022 were expected to top $100 million, corporation officials have said. In the first four months of 2022, Citizens was hit with more than 3,800 lawsuits, a number one Citizens’ official called “pretty crazy.”

The Citizens Board of Governors approved the DOAH policy endorsement last July and the Florida Office of Insurance Regulation approved it August. It took effect for new and renewing policies on Feb. 1.

By going to DOAH, Citizens expects to save significantly in legal fees and to speed resolution of cases. The endorsement notes that plaintiffs’ attorney fees are capped at $200 an hour, with no fee multipliers. And DOAH does not have the backlog of cases that many county and circuit courts have around the state.

Citizens cases last year took an average of about 430 days in the court system. That time frame is expected to drop to about 100 days at DOAH, partly because DOAH does not face such a backlog of lawsuits, Tim Cerio, Citizens’ former chief counsel, now CEO, said last year.

In 2019-20, the Division of Administrative Hearings handled some 6,300 requests, an 11% decrease from the previous year. And many DOAH requests are referred to mediation. Florida’s court system, on the other hand, in 2021 and 2022 saw roughly 4,500 lawsuits filed per month against the largest 16 insurance carriers, according to CaseGlide, a litigation management software firm.

Unlike binding arbitration decisions, DOAH judges’ rulings can be appealed to a Florida District Court of Appeals.

Either party, Citizens or the policyholder, may request that a claims dispute be heard by a DOAH judge.

“We don’t expect an immediate surge of cases going to DOAH as the law applies to new policies and renewing policies after Feb. 1,” said Michael Peltier, communications director for Citizens. “These claims will have to run their course. Secondly, the DOAH provision is elective so either party can request.”

DOAH has two vacancies in its judges positions now, but Newman expects those to be filled by summer. The 30 DOAH judges normally handle a range of issues, including child support cases, mental health hearings, and disputes brought by businesses over state agency rules or over penalties assessed for violating regulations.

Newman doesn’t believe Citizens’ cases will be much different.

“It’s just another government entity,” Newman said.

Some plaintiffs’ lawyers have argued that the plan will hurt policyholders. By limiting attorney fees, fewer lawyers will be willing to take on the cases, and ALJs may not be familiar with the intricacies of insurance law.

The administrative law judges are all lawyers but some may have little experience in all relevant areas, claimants’ attorneys have argued. One former judge has suggested that an expanded roster of DOAH judges should include jurists with expertise in insurance claims disputes.

By Insurance Journal Staff Reports |

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Freddie Mac, one of two mortgage-buying companies that buttress the U.S. home-lending market, has agreed to accept the Kroll Bond Rating Agency as a rating firm for homeowners’ insurance companies.

“We have expanded our list of eligible rating providers to include the Kroll Bond Rating Agency (KBRA),” Freddie, formally known as the Federal Home Loan Mortgage Corp., posted on its selling guide Wednesday. “We will now accept an insurer with a minimum insurance financial strength rating of BBB rated by KBRA.”

The approval will be seen as good news for policyholders with Frontline Insurance group, which had been dropped by its previous rating firm, Demotech, after a disagreement over Demotech’s plan to downgrade some Florida carriers.

Frontline and its sister company, First Protective Insurance Co., both have a financial rating of BBB+ from KBRA, good enough to keep Freddie Mac from requiring insured mortgagees to find a new carrier or be forced-placed. As of last fall, First Protective was ranked the 8th-largest property insurer in Florida, with almost 231,000 policies in force, according to the Florida Office of Insurance Regulation.

KBRA has recently signed on several more Florida carriers and now rates at least eight, including:

  • United Insurance Holdings, parent of United Property & Casualty (BB), which is now in an orderly runoff
  • Heritage Property & Casualty Insurance (BBB-); (Heritage also has an “A Exceptional” rating from Demotech)
  • Tower Hill Prime Insurance (A-); and Tower Hill Insurance Exchange (BBB+); (both have an A rating from Demotech)
  • Universal Property and Casualty Insurance (A-); (has an A rating from Demotech)
  • Olympus Insurance Co. (BBB+); (A rating from Demotech)
  • American Traditions Insurance Co. (BBB); (A rating from Demotech).

The ratings issue has been simmering since last summer, when Demotech told as many as 16 carriers that they were headed for a ratings downgrade or withdrawal, thanks to their surplus shortages and underwriting losses brought on in part by Florida’s distressed market and hyperactive litigation scene. Florida regulators and the Florida Association of Insurance Agents sharply criticized Demotech for the notice, arguing that the rating firm was inconsistent and had not followed its own criteria.

Since then, regulators have devised a plan to let the state-created Citizens Property Insurance Corp. act as a backstop on unpaid claims in case of an insurer insolvency, a plan later approved by Freddie Mac and Fannie Mae. The Florida Department of Financial Services also commissioned a study on alternatives to Demotech, which for more than two decades was the predominant rating firm for Florida insurers.

Frontline officials have not previously responded to requests for comment on this issue.

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The acceptance of KBRA should help put to rest some confusion created in January over Frontline’s rating. The insurance group initially said it was participating in the Citizens’ cut-through endorsement plan. But a day later, Frontline officials suggested in a bulletin to agents that Freddie Mac was planning to accept KBRA as a rating firm.

Fannie Mae, the Federal National Mortgage Association, which buys loans mostly from larger lending companies, already had accepted KBRA ratings. Both organizations now accept favorable insurer ratings from KBRA, Demotech, AM Best, and S&P Global.

Demotech President Joe Petrelli said in an email Wednesday that Demotech has been accepted by Freddie Mac since 1990.

TOPICS AGENCIES

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By Chad Hemenway

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As it had warned last month, Allstate Corp. reported a fourth quarter 2022 loss of $310 million as losses from auto insurance outpaced an increase in revenue.

Results were in comparison to net income of $790 million for Q4 2021. Throughout 2022, Allstate has increased rates on auto insurance to keep pace with fast-climbing loss costs in the segment. However, Allstate recorded a total Q4 underwriting loss of just over $1 billion, and an underwriting loss of nearly $3 billion for all of 2022, as the auto line finished with an unprofitable Q4 combined ratio of 112.6 on higher claim severity and accident frequency compared to Q4 2021 as well as an increase in prior-year claims reserves.

Auto insurance saw a Q4 underwriting loss of $974 million, and a loss of more than $3 billion for the year.

“While revenues increased to $13.6 billion, due to 9.5% growth in Property-Liability premiums, higher auto insurance prices were not sufficient to overcome increased loss costs and reserve increases,” said CEO Tom Wilson, in a statement. “The comprehensive plan to return auto insurance margins to target levels continues to be implemented in 2023 and is expected to further increase average premiums, reduce expenses and lower policy growth.”

Prior year reserves were strengthened $282 million in Q4 2022, including about $180 million primarily related personal auto and about $100 million related to commercial auto insurance from shared economy and states that are being exited, Allstate said.

Premiums written during Q4 were $11.5 billion, an increase of 11.4% compared to the prior year quarter, as premiums written in auto insurance went up 13.3% in Q4. Allstate brands implemented auto rate increases in 38 locations in Q4 at an average of 11.2%.

Catastrophe losses in Q4 were $779 million – 47.5% more than Q4 2021 – driven by losses from Winter Storm Elliot. The storm was the primary driver of a 5.5 point increase in the Q4 combined ratio for the homeowners segment to 92.6.

Net written premium in homeowners increased 10% compared to the prior year quarter due to inflation in insured home replacement costs and implemented rate increases.

TOPICS AUTO CLAIMS PROFIT LOSS PRICING TRENDS

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The Citizens Property Insurance Corp. Board of Governors, in a special meeting Tuesday, surprised some in the Florida insurance industry by naming its general counsel as CEO – without a nationwide search.

The board voted unanimously to elevate Tim Cerio to replace longtime CEO and director Barry Gilway, who announced his retirement in December. Before Gilway took over in 2012, Citizens launched a wide search for a new leader, eventually luring Gilway, who had worked with other major carriers in North America.

Cerio, who has served as Citizens’ general counsel for a few years, was named the corporation’s interim CEO in December. On Tuesday, the board wasted little time in making him permanent executive.

Cerio

“Frankly, my predisposition often times is to do a more formalized search,” board member Charlie Lydecker said at the meeting, noting that he was recently involved in a national search for a new University of Florida president. “But in the case of Citizens, the needs are very, very different.”

It’s not often that a corporation has an experienced leader waiting in the wings at a time when a smooth transition is needed, Lydecker said. Cerio has been practicing law for more than 25 years and has negotiated multi-billion deals, Lydecker and a Citizens news release said.

Cerio also is known for his involvement in Florida politics, behind the scenes. He served as general counsel to Rick Scott in 2015 and 2016, when Scott was governor of Florida. Cerio also serves on the Florida Supreme Court Judicial Nominating Commission and is a member of the Board of Governors of the State University System of Florida. He’s on the board of the James Madison Institute, known as a conservative, free-market think tank, and previously served on the 2017-2018 Florida Constitution Revision Commission.

“Over the past decade under Barry Gilway’s leadership, Citizens has become an industry leader on so many fronts,” Cerio said in a statement. “I’m excited and honored to continue that legacy as we address new challenges and work toward stabilizing the Florida property insurance market.”

Board members said the transition comes at an important time for Citizens, just five weeks before the Florida Legislature convenes in March. Lawmakers at a special session in December adopted major reforms designed to limit litigation costs for property insurers, but more changes could be on the way this year.

Gilway

Citizens, created by the Legislature 21 years ago to serve as an insurer of last resort, ballooned to more than 1.2 million policies last year due to its limits on premium increases, making it the largest carrier in the state by far. Several other carriers have stopped writing in Florida, have gone insolvent or have raised premiums significantly.

Officials have made it a priority to reduce the policy count and exposure for Citizens.

“Given the state of the market, the legislative changes that have to occur, it would be a real mistake to spend three months to six months going through a search process, while I absolutely believe we have a perfect candidate in front of us,” Gilway said at the meeting.

Cerio’s appointment will have to reviewed by the Florida Senate.

TOPICS FLORIDA

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OIR Approves Slide/UPC TransactionThis afternoon, the Office of Insurance Regulation (OIR) signed a consent order approving Slide’s assumption of the vast majority of United Property and Casualty’s (UPC) Florida homeowners policies. Under the agreement, Slide will assume approximately 72,000 HO-3 and DP-3 policies through a cancel/rewrite transaction. Slide also acquired the renewal rights for an additional 21,000+ UPC policies that renew in April or May. Slide is expected to communicate a list of policies acquired by the end of this week. FAIA will continue to work with the OIR and Citizens to find a solution for the policyholders not being assumed under this agreement. Over the past several months, FAIA has been working to find solutions for agents impacted by UPC’s decision to non-renew their personal lines book. UPC has roughly 116,000 policies in force in Florida, which means many of the company’s appointed agencies have large books of business. As most personal lines agents know, there are very few private market alternatives for displaced policyholders. Though we were unable to share the details of our efforts until now, agents can remain confident that their association has been working steadily to represent their interests as this has unfolded. “Slide has been working with FAIA and state regulators for the last couple of months to negotiate a transaction that provides policyholders and their agents with a seamless policy transition,” said Slide co-founder and CEO Bruce Lucas. “FAIA’s advocacy for their agents and policyholders was instrumental in making this transaction work.” The details of the approved transaction are as follows:The transaction is expected to be completed Wednesday, February 1.UPC will cancel the vast majority of policies on February 1, and Slide will immediately issue replacement policies on the same forms, duration, and premium until the in-force policies expire.Slide renewals will use Slide’s rates and forms.Agents will retain pre-paid commissions. However, agents will have to return unearned commissions if a policy is canceled before expiration.Agents not already appointed with Slide will receive communication to establish an appointment.Policyholders will receive a notice of cancellation with a new declaration page and a letter explaining the process.If the premium has been paid in full, it will be transferred to Slide.Policyholders will pay future premium payments directly to Slide.Slide will continue to use the same systems as UPC for the policies until they renew.General information regarding Slide:Slide’s headquarters is in Tampa.Slide’s Territory Sales Managers will be the agents’ primary point of contact.Slide recently raised $105 million in equity.Slide founder & CEO Bruce Lucas was the founder and CEO of Heritage Property & Casualty Insurance Company. He successfully completed three similar cancel/rewrite transactions with Sunshine State Insurance, Sawgrass Mutual Insurance Company, and St. Johns Insurance Company.More than 350 FAIA members accessed UPC through sub-producer agreements with Independent Market Solutions (IMS). IMS has executed an agency agreement with Slide, which provides UPC sub-producers the opportunity to become Slide sub-producers. For agents who had a UPC sub-producer agreement with IMS, but already have a contract with Slide, your UPC book being assumed by Slide will move to your direct appointment. Slide executed a similar transaction with St. Johns Insurance Company last year. It was widely regarded as a success for agents and policyholders alike. Given the condition of Florida’s homeowners market and the details of the approved transaction, which will cause little to no disruption for agents and their clients, FAIA recommends that agents perform their due diligence and strongly consider leaving these policies in place and accepting the appointment agreement offered by Slide or the sub-producer agreement from IMS.FOLLOW THE DISCUSSION

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More than 100 people in Miami are looking for new homes after a fire destroyed dozens of units at an apartment complex this week. Residents said they were doubly incensed after learning that the complex had no property insurance.

Local news outlets reported that Miami Gardens-area complex on NW 177th Street went up in flames Saturday morning. The roof collapsed on dozens of units and many people escaped with few of their belongings.

On Monday, the property manager reportedly told residents that after tenants recently balked at paying a fee for the building’s 40-year inspection and recertification, the property had its insurance canceled, according to Local10.com, a TV news station.

More than 50 people from the complex found shelter at a recreational complex about five miles away, the Miami Herald reported. The American Red Cross and other aide organizations assisted residents with resources.

Fire officials were investigating the cause of the blaze.

By William Rabb 

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At least one of Allstate Insurance group’s Florida subsidiaries plans to non-renew 33,000 Florida condominium policies, starting in June.

In a notice sent to Florida agents this month, Allstate said its Castle Key subsidiary had sent a letter Jan. 11 to the Florida Office of Insurance Regulation about dropping the coverage. The letter was marked “trade secret,” so details about the policies were not made public by the OIR.

Allstate, which changed the name of its Florida subsidiaries in 2009, did not indicate if Castle Key Insurance Co., Castle Key Indemnity Co., or both, are included in the action.

“The entire industry is experiencing significant cost pressures,” due to more-frequent storms and higher cost of repairs, reads the bulletin from Caren Latona, Allstate’s Central East Zone sales director, and Shannon Bauer, Southeast regional sales manager.

The OIR may still disapprove the withdrawal, but Allstate’s memo to agents sounded confident that regulators would allow it. The carrier said it will provide customers with the required 120-day notice prior to non-renewal dates. Agents may continue to write condos through Citizens Property Insurance Corp., the memo added.

The move is another squeeze on Florida condominium owners, which have seen other carriers non-renew, raise premiums, or require more inspection and safety data in the wake of the 2021 collapse of the Champlain Towers South near Miami Beach. The late-night collapse killed 98 people and led to significant legislative reforms, requiring more frequent inspections and more repair funding to be reserved by condominium associations.

Castle Key, which can be written only by Allstate agents, does not write master condo policies, so condo associations are not affected, but unit owners’ personal policies will be, explained Travis Moore, a consultant who represents condominium interests.

Unit owners could soon see higher premiums. By moving to Citizens, condo units will now face the added cost of flood insurance. Senate Bill 2A, adopted in the Florida Legislature’s special session in December, now requires all Citizens policyholders to also obtain flood insurance, regardless of elevation.

As of the third quarter of 2022, Castle Key Insurance and Castle Key Indemnity reported a combined total of 322,504 policies in force in Florida and $462 million in total written premium, according to the Florida Office of Insurance Regulation. Castle Key Indemnity was ranked the seventh-largest property insurance carrier in Florida for Q3 last year, according to OIR data examined by the South Florida Sun Sentinel news outlet.

Allstate’s media relations team had not provided further information on the nonrenewals by Sunday. The news may not be surprising, after Allstate Corp. said last fall that it had incurred a net loss of $694 million for Q3. All of it has raised concerns in the industry that more nonrenewals by Allstate or other carriers may be coming in 2023.

The news marks at least the seventh major carrier to non-renew policies in Florida’s distressed insurance market since late 2021. That includes six insurers that have gone insolvent and one that is in an orderly runoff. Last June, Allstate announced it was suspended writing new Florida condominium business, Florida’s former deputy insurance commissioner, Lisa Miller, reported.

Senate Bill 2A and previous reforms are expected to stabilize the market, reduce reduce litigation costs, and help prevent further market withdrawals from the Florida market. But officials have said it may be another year or two before the full effect is felt.

Just before the nonrenewal announcement, Castle Key Indemnity Insurance also filed for 14.9% rate increase for its condominium program.

TOPICS FLORIDA

By L.S. Howard

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A convergence of global events has led to the hardest property catastrophe reinsurance market in a generation and a “complex,” “grueling” and “late” January renewal season, which went down to the wire, according to reports by brokers Gallagher and Howden Re.

The geopolitical and macroeconomic shocks that occurred during 2022 included the war in Ukraine, fractured energy markets, 40-year high inflation, interest rate hikes, depleted capital and Hurricane Ian, the second most expensive natural disaster. The result, said re/insurance broker Howden, was the introduction of “significant volatility into the market” as well as massive reinsurance rate increases at the Jan. 1, 2023, renewals, which it described as the “hardest property-catastrophe reinsurance market in a generation.”

Howden said average global rate increases recorded at the renewals were 37%-plus for global property catastrophe (the biggest year-on-year increase at 1/1 since 1992); 45%-plus for direct and facultative business (a cumulative increase of 160% since 2017); 50%-plus for retrocessional cover (a cumulative increase of 165% since 2017) and 5%-plus for London market casualty reinsurance excess-of-loss rates (which reinsurers blamed on rising inflation and the prospect of higher claims severity).

Gallagher Re described the reinsurance renewal season process as tense, late, complex and, in many cases, frustrating. The good news is that the renewals were “largely completed,” the broker affirmed.

“The two areas that saw the most capacity constraints were peak-zone U.S. property catastrophe capacity and coverage for strikes, riots & civil commotion and war,” Gallagher Re stated in its report, “1st View: Market Turns – January 2023.”

“In most other lines and regions, buyers have largely been able to source capacity, albeit at a higher cost and in many cases changed structures with an increase in attachment points and the raising of the ‘floor’ on minimum rates-on-line, a key focus for many reinsurers,” the report said.

Howden’s report, “The Great Realignment,” highlighted the fact that dedicated reinsurance capital has eroded by 15.7% to $355 billion at year end 2022, the biggest reinsurance capital squeeze since 2008. The report noted that capital inflows in the months after Hurricane Ian were “negligible” compared to the amounts raised in the final months of 2001 and 2005 after Sept. 11 and Hurricane Katrina, respectively.

Howden explained that capital raises from incumbent carriers in 2022 were restricted as a result of heightened market uncertainty and higher financing costs. “Nor was there any meaningful reload from third-party capital investors, who were inclined to assess [Jan. 1] renewal outcomes before weighing potential deployment opportunities in 2023.”

Reinsurance buyers sought to secure additional top-end cover in response to rising insured values and more premium entering the market, but these demand-side pressures coincided with a severe capacity crunch, said Howden, explaining that capital — from both rated carriers and insurance linked securities (ILS) providers — either pulled back or only maintained allocations.

“The reinsurance sector has reached concurrent secular and cyclical tipping points,” said David Flandro, head of Analytics, Howden, in comments accompanying the report. “It is experiencing sustained, heightened loss activity and war risk just as the global economy exits the ‘great moderation’ of interest rates and asset price volatility.” He said: “The last time we saw this level of capital dislocation was during the 2008-2009 global financial crisis. At the same time, the sector is experiencing its most acute, cyclical price increases since the 2001-2006 period if not before.”

Reinsurance Buyer Complaints

Gallagher Re noted that several buyers complained that their efforts to approach markets early with more detailed renewal presentations to address reinsurers’ concerns

over inflation and coverage were not recognized. “Only a limited number of reinsurers were prepared to offer quotes in a timely fashion, leading to difficulties for clients and their brokers to find market clearing prices, terms, and conditions.”

In a press release, James Kent, global CEO, Gallagher Re, said: “The renewal process has been grueling for participants, many of whom have not faced such a rapid change in market conditions across a single renewal season.”

“Times of significant market change are always challenging to navigate but we have seen a significant difference in the ways that individual reinsurers have reacted despite a widespread stated ambition to grow premium volumes in what is being viewed as the best treaty underwriting terms and conditions for a generation,” Kent added.

Some “reached the end of the renewal season with reputations enhanced, exercising a firm, fair, transparent approach based on a commitment to their own view of pricing adequacy. Others who have acted less deftly may find sustaining long-term client relationships more challenging, especially once capital and competition rebuild in the global reinsurance market,” he said.