By Staff and Wire Reports 

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An Atlantic hurricane season that had 14 named storms officially ended on Wednesday, leaving residents in the Florida Keys to celebrate even as others around Florida and Puerto Rico continue to grapple with the damage caused by Hurricanes Ian, Nicole and Fiona.

The number of named storms was fewer than expected, but one powerful tempest, Hurricane Ian, caused extreme losses. This year is a harbinger of future hurricane seasons, says a report from reinsurer Munich Re.

“It is precisely hurricanes like Ian – very strong storms with extreme precipitation – that will occur more frequently in the future due to climate change,” Munich Re’s chief climate scientist, Ernst Rauch, said in the report.

Research shows that the total number of storms will not increase, but the planet will see a rise in severe hurricanes with heavy rainfall, he noted.

The 2022 season had an unusually calm first half but made up for that with the three destructive hurricanes in the second half, ending with an average number of named storms. The season runs from June 1 until Nov. 30.

This year’s period saw eight hurricanes with winds of at least 74 mph (119 kmh), and two of them intensified to major hurricanes with winds reaching at least 111 mph (179 kmh), according to the National Oceanic and Atmospheric Administration. An average hurricane season has 14 named storms, seven hurricanes and three major hurricanes, forecasters said.

Ian, which made landfall on Florida’s southwest coast Sept. 28, is projected to produce as much $65 billion in insured losses, not including national flood insurance losses, Munich Re reported. That helped make 2022 the third-most expensive season on record.

This season is also notable for how inactive August was. This was the first time since 1941 that the Atlantic Ocean had gone from July 3 to the end of August with no named storm, Colorado State University hurricane researcher Phil Klotzbach said. Since 1950, only 1997 and 1961 had no named storms in August.

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Several hundred Florida Keys residents gathered Wednesday to mark the season’s close by burning hurricane warning flags. The event featured a blast blown on a conch shell, a symbol of the Keys, and speakers recalled those affected by the 2022 hurricanes and expressed gratitude that the Keys were spared major impacts. Members of Key West’s ceremonial Conch Republic administration then doused the hurricane flags with rum and set them ablaze. The event was staged beside the U.S. Coast Guard Cutter Ingham, a maritime museum docked at Key West’s Truman Waterfront.

In late September, Hurricane Ian made landfall as a Category 4 storm in southwest Florida before leaving nearly 150 deaths and a swath of destruction as it moved northeast across the state. After making its way back to the Atlantic, the storm headed north and struck South Carolina as a Category 1 storm. With 150-mph (241-kmh) maximum sustained winds, Hurricane Ian tied for the fifth-strongest hurricane ever to make landfall in the U.S., officials said.

Hurricane Nicole’s eye hit central Florida’s Treasure Coast area as a Category 1 storm in early November, but the greatest damage seemed to occur more than 100 miles (160 kilometers) to the north around Daytona Beach, where beach erosion started by Hurricane Ian worsened and led to homes collapsing into the ocean.

Hurricane Fiona was the season’s first major hurricane, eventually becoming a Category 4 storm with winds of 130 mph (215 kmh) as it rumbled toward Canada. The center of the storm missed the mainland U.S., but it hit Puerto Rico as a Category 1 in mid-September, leaving the entire island without power and at least 25 people dead.

Photo: Revelers in Key West celebrated the end of hurricane season Wednesday by dousing hurricane warning flags with rum and setting them afire. (Andy Newman/Florida Keys News Bureau via AP)

Copyright 2022 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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Florida Consultant on Demotech Alternatives Faced Issues in Other States, Reports Show

By William Rabb | December 1, 2022

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A Mississippi-based consulting firm hired to figure out Florida’s insurance company financial rating conundrum has faced scrutiny in other states after audits found improper disbursement of funds, long delays in projects and other issues.

Horne LLP, based in Ridgeland, Mississippi, was hired in Florida in early November after submitting a bid to manage a Department of Financial Services study on alternatives to the current carrier ratings system. The ratings issue arose earlier this year after the Demotech rating firm, which scores the stability of the majority of Florida property carriers, announced that it was on the cusp of downgrading or withdrawing the ratings for as many as 16 insurers.

That sent state insurance officials into overdrive, condemning Demotech for what the officials said was a failure to adhere to its own criteria. Regulators began searching for alternatives, and Florida’s Joint Legislative Budget Commission in September set aside $1.5 million to hire a consultant to explore options.

In October, a request for qualifications was issued. Two firms, Horne LLP and Alavarez & Marsal, an international consulting firm based in New York, submitted the only two proposals. The contract was awarded to Horne. Although state officials have not provided details on why Horne won the bid, it’s probably because the firm’s rates were significantly lower than Alvarez’, those familiar with the process said.

Since then, reports have surfaced that state auditors in Louisiana and West Virginia have questioned Horne’s involvement with or management of multimillion-dollar projects in those states. The Advocate newspaper in Baton Rouge, Louisiana, reported Nov. 18 that the Louisiana legislative auditor’s office has been asked to investigate whether Horne employees improperly received some of the $147 million COVID-19 homeowners’ relief fund that the consulting firm was hired to manage.

The audit found that something didn’t look right, officials said.

A Louisiana official told the Advocate that the Horne employees involved were removed and that the state is sticking with Horne on the project.

“We’ve been satisfied with their performance and particularly satisfied with management’s response to this problem,” said Louisiana’s commissioner of administration, Jay Dardenne. “We’re very happy with their performance other than this one incident.”

Officials with Florida’s Department of Financial Services had not responded by late Wednesday to requests for comment about whether the news article raises concerns about Horne.

Florida consultant Jack Nicholson, the former chief operating officer for the Florida Hurricane Catastrophe Fund and a member of the Horne team that is working on the ratings study, said he was unaware of the article or the audit.

The company had no comment on the news report, a spokesperson said.

In West Virginia in 2018, a state auditor found that a contract with Horne, potentially worth as much as $18 million, had not been properly bid, according to a West Virginia news report. The West Virginia governor’s office responded that the contract, to oversee a flood-relief program, was let under an emergency provision in an effort to speed up long-delayed disater payouts, and had met state and federal regulatory requirements.

After the controversy broke, Horne was paid $6 million, but further payments and a contract extension were halted, the report noted.

And in Alabama, the federal government in February of this year ended up clawing back more than $42 million from a statewide program managed by Horne. The program was too slow in providing the federal COVID-related rental assistance, according to an Alabama news report. Horne completed its $9.4 million contract on the project but the program had distributed just about a fourth of the funds that were available.

Horne declined to comment to the news outlet, but other Alabama officials said that many applications were rejected as fraudulent, and that vetting applicants was a complex, time-consuming process. At least four other states had contracted with Horne on similar rent-relief disbursements, and delays have been reported.

Horne began as an accounting firm more than 50 years ago in Mississippi and it has expanded to 11 other states, including Florida. It came to be involved in the bid for the Florida insurance rating study after Nicholson said he and others put a team together.

The initial consulting firm was Tallahassee-headquartered Thomas Howell Ferguson, CPAs. After Ferguson’s leadership decided it didn’t have the depth in that type of consulting, the project was transferred to Horne, Nicholson explained.

Part of the state’s directive in issuing the RFQ was that the consultant should survey all Florida P/C insurers, as well as rating firms and the secondary mortgage lenders – Fannie Mae and Freddie Mac.

But the survey sent by Horne to carriers already has met with opposition from some insurance executives who worry that their answers could be made public under Florida’s broad open-records laws.

“If I were a carrier I wouldn’t answer it,” said one insurance industry executive.

The SurveyMonkey questionnaire asks insurance company officials if they had received a letter from Demotech in June suggesting they would soon be downgraded; if they are satisfied with Demotech; what they think of DFS’ plan to identify an alternative to Demotech; among other matters.

A preliminary report from Horne is due Jan. 7, Nicholson said. That report may keep survey responses anonymous, but it’s possible that an open records request could eventually produce insurers’ responses and emails, with names of company respondents, some have suggested.

The response from insurers has so far been underwhelming, industry activists said.

One focus of the ratings issue study, according to the survey and Nicholson is to examine the viability of a state-run rating agency, perhaps overseen by DFS or the state Office of Insurance Regulation. The burning question there is, “What will it take for Fannie Mae and Freddie Mac to accept the credibility of such an agency?”

The mortgage-purchasing firms generally require that federally backed mortgages be insured by carriers that are favorably rated by a recognized rating firm, such as Demotech, AM Best or KBRA. It’s not clear what Fannie and Freddie would think of a nacent agency run by a state government that arguably has a vested interest in keeping more insurers in business.

Nicholson said Wednesday that Horne was still working to secure a meeting with Fannie and Freddie officials.

Some of the Horne recommendations will depend on what actions the Florida Legislature takes at a special session on insurance and property taxes, set for Dec. 12-16. If lawmakers take further steps to limit claimants’ attorney fees and reduce insurers’ litigation costs, it may be possible that “rating agencies will be able to give them a rating based on their real strength,” without the weight of millions of dollars in legal expenses that have been shown to be far greater in Florida than in other states, Nicholson said.

Another option the report may examine: the effect of providing more state-backed reinsurance, which could potentially satisfy the mortgage lenders. Another: allowing insurers to set up a 100% pass-through of losses to reinsurers, international firms that may already have a sterling financial rating, Nicholson said.

Some critics, including the Insurance Information Institute’s Mark Friedlander, have called the idea of exploring alternatives to Demotech a waste of time and money. Other rating firms are just as likely to downgrade struggling insurers, given Florida’s litigious environment, and Fannie Mae and Freddie Mac are unlikely to accept a state-run rating scheme, he said recently.

Former Florida Insurance Commissioner Kevin McCarty also weighed in on the criticism of the Demotech ratings.

“The reality is that many Florida insurers are currently at risk of being downgraded,” McCarty wrote in an opinion piece in the South Florida Sun Sentinel in September. “That would be true regardless of which rating company was evaluating their financial condition.”

TOPICS FLORIDA

By Jim Sams 

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The Florida Supreme Court has approved the emergency suspended the law license of North Fort Myers attorney Jennifer Perez, who was in charge of a “mobile claim center” that was set up in a trailer in North Fort Myers about a week after Hurricane Ian passed through the region.

The high court unanimously approved the suspension that was recommended by the Florida Bar. The court ordered Perez, within 30 days, to cease representing any clients, cease acting as a personal representative or trustee and cease withdrawing money from any trust account.

The order also requires Perez to stop using the trailer labeled “mobile claim center” in Florida and provide a list of names and contact information for any persons that it had agreed to represent who were signed up at the mobile claim center.

Investigators for the Florida Bar alleged that Perez attempted to solicit customers by deceiving them into believing the mobile claim center was part if an insurance village set up by the state and the Federal Emergency Management Agency.

Jennifer Perez

Perez denies that was the intent. An attorney filed a motion to dismiss the Bar’s emergency petition last week, saying that the claims center was never used to solicit hurricane victims but was set up to provide office space for the Gauthier Murphy & Houghtaling law firm’s existing commercial clients. The law firm, headquartered in the New Orleans area, specializes in representing restaurant owners.

A lawyer who frequently faces off against the GM&H law firm in court spoke in defense of Perez on Monday afternoon. Steve Badger, a partner with the Zelle law firm in Dallas, said he is pleased to see the Florida Bar investigating allegations of barratry — the improper solicitation of clients.

“In this case, however, it appears the facts were not as they initially appeared,” Badger said in an email. “I understand that prior to the Florida Supreme Court’s action today, the Florida Bar had already reached an agreement with Ms. Perez to avoid the suspension based on her representation that there was no intent to retain clients through use of the mobile claims center and, in fact, no such clients were retained. I’m told this agreement should be publicly disclosed in a couple days.”

Perez’s attorney, Henry Cox III, with the Bedell Firm in Jacksonville, said he was in a lengthy meeting on Monday and did not immediately offer any comment.

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Perez has worked for GM&H since obtaining a juris doctor from Loyola University in New Orleans in 2018. She was admitted to the Florida Bar in 2020 and named a partner with the firm specifically to represent Florida clients, according to the petition to dismiss filed by Perez’s attorney. The Bar’s website shows her having an office in North Fort Myers.

Attorneys for the Florida Bar are responsible for investigating and prosecuting lawyers who violate its rules. The Florida Supreme Court appoints a circuit or county court judge to preside over disciplinary proceedings as referees. The referee makes findings and recommendations to the Florida Supreme Court, which has ultimate authority to determine if an attorney should be disciplined. Potential penalties range from a reprimand to permanent disbarment.

The court appointed Judge Charles Roberts with the 12th Judicial Circuit in Sarasota to act as referee in Perez’s case.

Every attorney who is suspended from practicing law must wind down their practice within 30 days, according to Bar rules. Any suspension for longer than 90 days requires the lawyer to petition the court for reinstatement.

The Supreme Court ordered Perez’s suspension to continue indefinitely.

TOPICS FLORIDA CLAIMS

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Spiking insurance costs are impacting the real estate market in south Florida, causing some developers to put major projects on hold – despite booming demand for residential and commercial property.

The Wall Street Journal reported Tuesday that a number of developers behind high-rise buildings and apartment communities have pulled the plug on projects due to the sharp rises in insurance premiums, alongside the cost of inflation and higher interest rates.

One San Antonio development executive who had planned large apartment buildings in south Florida told the newspaper that the insurance costs alone, up 30% in recent months, can kill a deal.

While insurance costs three years ago were about 2% of total project costs, now they can be about 8%. That includes builders’ risk insurance, covering damage while the building is under construction; liability insurance; construction defect coverage; and property insurance after construction is finished.

Florida is notorious for its insurance claims litigation, which has been called a driving factor behind rising property insurance premiums and insurer insolvencies. But the state also has seen an increase in construction defect litigation, the Journal reported. In the wake of the collapse of the Champlain Towers South condominium building in 2021, condo associations find themselves under new pressure. After a building is completed, many condo boards now hire engineers to inspect and if any defects are found, and developers don’t correct them, the associations are prone to sue, one construction attorney told the newspaper.

The Champlain Towers collapse that killed 98 people also has affected insurers and costs in another way: One lawsuit argues that the construction of a high-rise building next to the collapsed condominium destabilized the structure. Now, insurance carriers have to be prepared not only for claims from the insured property, but for adjacent properties as well, New York-based developer Ian Bruce Eichner explained.

Many developers have had to resort to using multiple insurers to cover one property. And the problem could soon worsen, as property insurance premiums are expected to rise in the wake of Hurricane Ian, which caused an estimated $40 billion in insured losses, and insurers pull back from vulnerable coastal areas, according to some estimates.

An insurance broker at Lockton, Fred Zutel, told the newspaper that all of the factors have made Florida the single-most difficult environment in which to procure insurance.

A special session of the Florida Legislature, set for Dec. 12-16, may address some of the cost factors for insurers, including litigation and reinsurance. But industry analysts have said it could take more than a year for any changes to make a difference.

Photo: The collapsed Champlain Towers South building in 2021. (AP)

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It’s On: Florida Special Session on Insurance Slated for Dec. 12-16

November 29, 2022

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It hasn’t been made official by the governor’s office, but Florida legislative leaders have set a date for a second special session to tackle property insurance issues – Dec. 12 through Dec. 16.

Memos from newly sworn Senate and House leadership show the date coincides with already-planned plenary and organizational meetings for the 2023 regular session of the Legislature, which starts in March. A formal proclamation on the special session is expected this week.

Renner

The memos did not address what reforms may be on the agenda, but insurance industry lobbyists, news reports and comments from legislative officials suggest that lawmakers may squash one-way attorney fees altogether in claims litigation; may further limit assignment-of-benefits agreements; provide a layer of state-backed reinsurance for carriers; and make some adjustments to the Florida Hurricane Catastrophe Fund, perhaps allowing easier access to the fund’s reinsurance.

New House Speaker Paul Renner, R-Palm Coast, last week said he is aiming for “systemic reform” that will shore up the private market and steer policyholders away from the ballooning, state-created Citizens Property Insurance Corp., according to Florida Politics news site.

He also did not rule out using tax dollars to provide lower-cost reinsurance for insurers, which are now facing another round of double-digit price increases from private reinsurance firms.

Many in the insurance industry have advocated for a lower cat fund retention level, or lower deductible, for carriers, to allow them to access the fund sooner, saving them significantly on reinsurance costs. But after Hurricane Ian hit Florida in September, the cat fund may be forced to go to the bond market and borrow billions of dollars to replenish its statutorily required reserve funding.

Now, an influential business group is reiterating its warning to lawmakers to stay away from tinkering with the fund.

“Expanding the size and scope of the Florida Hurricane Catastrophe Fund sends an unfortunate signal to private reinsurance markets that their capital is unwelcome,” reads a special session priorities briefing from Associated Industries of Florida, which represents a range of manufacturers and other businesses.

“Policymakers should guard against efforts to adjust its coverages at the expense of depleting its cash build-up,” which could make it more likely that Floridians and business owners could see another surcharge or “hurricane tax.”

If the session is anything like the first insurance-dedicated special session, held in May, the reform package will be crafted by legislative leaders and the governor’s office shortly before the session begins. In May, the proposed bills were unveiled less than 48 hours before the Capitol opened, and the bills sailed through in three days with almost no changes.

TOPICS FLORIDA

By Floridians for Lawsuit reform

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Roof claims abuse (leading to excessive litigation), increasing replacement costs, and limited legislative oversight are causing havoc for Florida homeowners, leading to an accelerated market collapse. https://lnkd.in/eP7uy2Be

Ronald R. Assise

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Home insurance is not a warranty policy. It is intended to make you whole again after you experience sudden and/or accidental damage to your home. Unfortunately, some unscrupulous contractors are promising “free” roofs to Florida homeowners for “damage” that is simply wear and tear.

There are some trial attorneys who file lawsuits for this “damage.” They’ve created a toxic environment that has driven Florida’s property insurance market to the brink of collapse and caused rates to skyrocket. Nine Florida Insurance carriers have become insolvent in two years.

Sounds bleak, but because this is a manmade crisis, it can be fixed. We need legislative reform for the following changes:

Repeal the one-way attorney fee statute.

Address the fallout caused by the 2016 Sebo ruling. Unscrupulous contractors use this ruling to get a “free” total roof replacement for their customers. 

Allow insurance companies to offer a roof value schedule in their home insurance policy: Just as vehicles depreciate due to wear and tear, so does a home’s roof.

Let’s hope legislators will address all the issues that have led to this crisis, so we can finally make the market viable and healthy again.

Reform needed to make property insurance market healthy

news-press.com • 3 min read

Jim Saunders, Reporter, News Service of Florida

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TALLAHASSEE, Fla. – As Florida lawmakers try to stabilize the troubled property-insurance system next month, they could face worsening problems with reinsurance, a critical part of the system.

Fitch Ratings released an analysis Wednesday that said overall reinsurance prices are expected to increase by more than 10 percent in 2023, pointing to losses from disasters such as Hurricane Ian and “increasing frequency and severity of natural catastrophe claims.”

“Price rises will be most pronounced in the regions worst affected by natural catastrophe events in 2022, including Australia, Florida and France,” the ratings agency said. “Hurricane Ian is likely to have caused between ($35 billion and $55 billion) of insured claims, making it one of the costliest natural catastrophe events ever.”

In the analysis posted online, Fitch also said it expects tighter restrictions when reinsurance policies are renewed in 2023, while raising the possibility that Florida property insurers will not be able to buy all of the reinsurance they need.

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“Nevertheless, we believe demand for property catastrophe reinsurance during the 2023 renewals season will be broadly met, except for Florida,” the analysis said.

Reinsurance, which is sold in a global market, is essentially backup coverage for insurers. It plays a crucial role in Florida, as evidenced by the projected tens of billions of dollars in damage from the Category 4 Hurricane Ian, which made landfall Sept. 28 in Southwest Florida before crossing the state.

When property insurers’ losses reach certain thresholds, reinsurance coverage is triggered to help pay claims. Costs of reinsurance are baked into policyholders’ rates.

Florida property insurers rely on a combination of reinsurance bought in the private market and from the state-run Florida Hurricane Catastrophe Fund. As an example of the importance of reinsurance, the Florida Hurricane Catastrophe Fund estimated last month it would have $10 billion in losses from Ian.

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Reinsurance costs and availability were a problem in the Florida market before Ian. During a May special legislative session, lawmakers agreed to spend $2 billion in tax dollars to temporarily provide additional reinsurance coverage to insurers.

Gov. Ron DeSantis called the May special session amid widespread problems in the insurance industry that have included homeowners losing policies and seeing massive rate hikes. Meanwhile, some property insurers have gone insolvent, and policies have flooded into the state-backed Citizens Property Insurance Corp., which was created as an insurer of last resort.

Problems, however, have persisted, and lawmakers will hold another special session the week of Dec. 12 that is expected to include making additional changes to try to bolster insurers.

House Speaker Paul Renner, R-Palm Coast, said Tuesday that lawmakers will look at a “kitchen sink of options” during the special session to try to stabilize the market and expand private coverage. He indicated those options could involve spending additional money to help with reinsurance.

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“It would be temporary, and it has to be contingent on getting major reforms so we actually fix the situation,” Renner told reporters. “I do not want to be in a situation where we make any kind of new long-term taxpayer commitment to underwrite insurance. That is not the goal. The goal is to have a healthy private market, to then begin depopulating (removing policies from) Citizens so that we get back to where we were not so many years ago, which is a healthy, vibrant market where people can not have a cardiac arrest when they get their renewal bills.”

News Service of Florida


ABOUT THE AUTHOR:
Jim Saunders

Jim has been executive editor of the News Service since 2013 and has covered state government and politics in Florida since 1998.

By 

Shahid S. Hamid

18

Fraud and lawsuits are to blame too

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Hurricane Ian’s widespread damage is another disaster for Florida’s already shaky insurance industry. Even though home insurance rates in Florida are nearly triple the national average, insurers have been losing money. Six have failed since January 2022. Now, insured losses from Ian are estimated to exceed $40 billion

Hurricane risk might seem like the obvious problem, but there is a more insidious driver in this financial train wreck.

Finance professor Shahid Hamid, who directs the Laboratory for Insurance at Florida International University, explained how Florida’s insurance market got this bad – and how the state’s insurer of last resort, Citizens Property Insurance, now carrying more than 1 million policies, can weather the storm.

What’s making it so hard for Florida insurers to survive?

Florida’s insurance rates have almost doubled in the past five years, yet insurance companies are still losing money for three main reasons.

One is the rising hurricane risk. Hurricanes Matthew (2016), Irma (2017) and Michael (2018) were all destructive. But a lot of Florida’s hurricane damage is from water, which is covered by the National Flood Insurance Program, rather than by private property insurance.

Another reason is that reinsurance pricing is going up – that’s insurance for insurance companies to help when claims spike.

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But the biggest single reason is the “assignment of benefits” problem, involving contractors after a storm. It’s partly fraud and partly taking advantage of loose regulation and court decisions that have affected insurance companies.

It generally looks like this: Contractors will knock on doors and say they can get the homeowner a new roof. The cost of a new roof is maybe $20,000-$30,000. So, the contractor inspects the roof. Often, there isn’t really that much damage. The contractor promises to take care of everything if the homeowner assigns over their insurance benefit. The contractors can then claim whatever they want from the insurance company without needing the homeowner’s consent.

If the insurance company determines the damage wasn’t actually covered, the contractor sues.

So insurance companies are stuck either fighting the lawsuit or settling. Either way, it’s costly.

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Other lawsuits may involve homeowners who don’t have flood insurance. Only about 14% of Florida homeowners pay for flood insurance, which is mostly available through the federal National Flood Insurance Program. Some without flood insurance will file damage claims with their property insurance company, arguing that wind caused the problem.

How widespread of a problem are these lawsuits?

Overall, the numbers are pretty striking.

About 9% of homeowner property claims nationwide are filed in Florida, yet 79% of lawsuits related to property claims are filed there.

The legal cost in 2019 was over $3 billion for insurance companies just fighting these lawsuits, and that’s all going to be passed on to homeowners in higher costs.

Insurance companies had a more than $1 billion underwriting loss in 2020 and again in 2021. Even with premiums going up so much, they’re still losing money in Florida because of this. And that’s part of the reason so many companies are deciding to leave.

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Assignment of benefits is likely more prevalent in Florida than most other states because there is more opportunity from all the roof damage from hurricanes. The state’s regulation is also relatively weak. This may eventually be fixed by the legislature, but that takes time and groups are lobbying against change. It took a long time to pass a law saying the attorney fee has to be capped.

How bad is the situation for insurers?

We’ve seen about a dozen companies be declared insolvent or leave since early 2020. At least six dropped out this year alone.

Thirty more are on the Florida Office of Insurance Regulation’s watch list. About 17 of those are likely to be or have been downgraded from A rating, meaning they’re no longer considered to be in good financial health.

The ratings downgrades have consequences for the real-estate market. To get a loan from the federal mortgage lenders Freddie Mac and Fannie Mae, you have to have insurance. But if an insurance company is downgraded to below A, Freddie Mac and Fannie Mae won’t accept it.

Florida established a $2 billion reinsurance fund in May that can help smaller insurance companies in situations like this. If they get downgraded, the reinsurance can act like co-signing the loan so the mortgage lenders will accept it.

But it’s a very fragile market.

Ian could be one of the costliest hurricanes in Florida history. I’ve seen estimates of $40 billion to $60 billion in losses. I wouldn’t be surprised if some of those companies on the watch list leave after this storm. That will put more pressure on Citizens Property Insurance, the state’s insurer of last resort.

Some headlines suggest that Florida’s insurer of last resort is also in trouble. Is it really at risk, and what would that mean for residents?

Citizens is not facing collapse, per se. The problem with Citizens is that its policy numbers typically swell after a crisis because as other insurers go out of business, their policies shift to Citizens. It sells off those policies to smaller companies, then another crisis comes along and its policy numbers rise again.

Three years ago, Citizens had half a million policies. Now, it has twice that. All these insurance companies that left in the last two years, their policies have been migrated to Citizens.

Ian will be costly, but Citizens is flush with cash right now because it had a lot of premium increases and built up its reserves.

Citizens also has a lot of backstops.

It has the Florida Hurricane Catastrophe Fund, established in the 1990s after Hurricane Andrew. It’s like reinsurance, but it’s tax-exempt so it can build reserves faster. Once a trigger is reached, Citizens can go to the catastrophe fund and get reimbursed.

More importantly, if Citizens runs out of money, it has the authority to impose a surcharge on everyone’s policies – not just its own policies, but insurance policies across Florida. It can also impose surcharges on some other types of insurance, such as life insurance and auto insurance. After Hurricane Wilma in 2005, Citizens imposed a 1% surcharge on all homeowner policies.

Those surcharges can bail Citizens out to some degree. But if payouts are in the tens of billions of dollars in losses, it will probably also get a bailout from the state.

So, I’m not as worried for Citizens. Homeowners will need help, though, especially if they’re uninsured. I expect Congress will approve some special funding, as it did in the past for hurricanes like Katrina and Sandy, to provide financial aid for residents and communities.

Shahid S. Hamid is a finance professor at Florida International University in Miami. This was first published by The Conversation — “The big reason Florida insurance companies are failing isn’t just hurricane risk – it’s fraud and lawsuits“.

By Insurance Journal Staff Reports 

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.

Grants for Home Hardening Now Available Under Florida Wind-Mit Program

By Insurance Journal Staff Reports | November 23, 2022

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Florida officials this week announced the hard launch of My Safe Florida Home, a program that provides up to $10,000 grants for wind-mitigation efforts for homeowners in vulnerable areas. Once completed, the fortification work can result in significant discounts on property insurance premiums.

The Florida Legislature approved the program in May, along with $150 million – enough funding for about 140,000 to 145,000 grants, state Chief Financial Officer Jimmy Patronis said in a statement Monday. Homeowners can apply here. If accepted, homes will be inspected free of charge, and owners can then apply for matching grants.

Similar programs had existed in some parts of the state in years past, but this one covers most of the coastal areas. Sales-tax exemptions also are available for materials used for home hardening, through June of 2024.

Not everyone in the hurricane-plagued state is eligible for the wind program, and some strings are attached. The home must be in a wind-borne debris region of the state. A map provided on the program’s website suggests the area (with expected winds of 140 mph or greater) runs roughly from Pasco County on the west coast, southeast to Highlands County, then due north to Volusia County. Parts of counties in the Panhandle also are eligible.

Homeowners also must match half the grant amount. For every $1 the owner provides, the program will provide $2 in grants. To receive the maximum grant amount of $10,000, an eligible homeowner would have to provide $5,000 of their own funds, Patronis’ office said. Patronis’ Department of Financial Services did not say how much the retrofitting would reduce HO insurance premiums, but for one Pensacola home that is not in a flood zone, for example, recent wind mitigation work cut the annual premium from about $6,600 to about $2,500.

Contractors who want to participate in the program can also apply here to become approved for the work, which may include hurricane straps or clips from roof to walls, hurricane shutter systems, and impact-resistant doors and windows.

The speed of the program’s roll out has met with some criticism, after two hurricanes hit the state this fall, four months after the plan was approved by lawmakers. An editorial in the Tampa Bay Times newspaper last week asked, “What is taking so long?”

The Department of Financial Services said it pushed out a “soft launch” of the program earlier this month, and has already received more than 400 applications. The office said in October it directed the program to be expedited during the procurement process for home inspectors.

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Inspector contracts went into effect on Oct. 31. The MSFH program initiated a soft launch on Nov. 18, to begin accepting applications for inspections and to test program online systems, before officially launching on Monday.

The newspaper also called for the Legislature, which is set to meet again in special session next month, to expand the program. The paper noted that under existing funding, only about 12,000 homes would be fortified, if each homeowner received the maximum amount.

“When hardened homes stand up to a hurricane, there are fewer insurance claims,” the editorial reads. “That’s good for both private insurance companies and state-run Citizens” Property Insurance Corp.

Wind-mitigation, now baked into Florida building codes, can make a significant difference, reports have indicated. After Hurricane Ian slammed southwest Florida Sept. 28, many newer homes were left standing, with minimal wind damage to roofs and windows, photographs show. Many older homes, most of which were not elevated to newer required levels, were wiped out by the flooding or suffered huge amounts of wind damage.

Photo: Tim Mullen, 47, and Michael Brissette, 11, cover their windows with hurricane shutters in preparation for Tropical Storm Elsa, in 2021 in Tampa. (Arielle Bader/Tampa Bay Times via AP)

TOPICS FLORIDA