Forclosure


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Although the 2019 hurricane season did not have a significant impact on Florida, loss creep from prior storms continues to weigh on reinsurers, leading to a likely rise in rates for the upcoming June renewal period. As noted in AM Best’s The Florida Market: Bracing for the Next Big Event (June 28, 2019), the reinsurance market for Florida property underwriters saw an initial round of hardening during the June 2019 renewal season.

The reported loss creep has in part been influenced by social inflation in the Florida market, resulting in adverse development of prior year loss reserves stemming from an increase in loss frequency and severity. Despite the lack of hurricanes making landfall last fall, companies—particularly the smaller, Florida-dominant property writers with questionable balance sheet strength—remain more susceptible to prevailing market conditions, such as hardening reinsurance pricing and adverse claims trends. Based on market surveillance, reinsurance rates are likely to increase by 15%-20% for the June renewal period; companies that depend highly on reinsurance may be most impacted

Because of inherent hurricane risk, Florida property writers spend a considerable amount on reinsurance, given the need for prudent catastrophe reinsurance programs. As we stated in our June 2019 report, a number of challenging issues in Florida have made it necessary for carriers to remain nimble in strategy and proactively manage several forms of risk, with rising reinsurance costs potentially being the next event on the horizon. Rising reinsurance costs have the potential to pressure some of the more thinly capitalized Florida-specific companies in the market.

Exhibit1 lists the companies that have a direct Florida property book of at least $1 million, for which the Florida book constitutes at least 50% of the carrier’s total book, and unaffiliated ceded premium written constitutes at least 50% of gross premium written. (Unaffiliated ceded premium provides a better picture of private market participation.)

Reinsurance dependence, as measured by unaffiliated ceded written premium to policyholder’s surplus, exceeds 100% for all but four of the 25 companies listed, indicating elevated sensitivity to the changing reinsurance environment.

Companies with high reinsurance dependence face difficult choices. Higher reinsurance rates may pressure earnings if insurers decide to continue writing business at existing levels. Those opting to retain more business may see declines in capitalization in the event of catastrophic storms; these companies may be forced to write less business to maintain existing capital.

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This will still be a band aid and could be a huge problem if the big storm actually hits Florida, but, we need the help now for rate relief!

Floridians currently pay the highest homeowner’s insurance rates in the nation, and no one should be surprised by this. Florida is a long relatively narrow large peninsula jutting out into bodies of warm water prone to tropical storms and hurricanes.

At the same time, we also have the most robust and competitive homeowner’s market of any state by far. This fierce competition keeps rates lower than they might be otherwise. As a consumer advocate, I have never been shy about stating that good market conditions create competition and innovation which benefits insurance consumers.

The last four years have not been good for the Florida homeowner’s insurance market. The impact is that the average policyholder will pay about $500 more per year to insure their homes—an average 25% rate increase on the median $2,000 a year policy.

What caused this? In the last four years, we have not only had several hurricanes after a 10-year respite, but also in each year we have had expensive non-hurricane events that have deteriorated insurance profits and claims reserves. Because of this, private reinsurance prices (this cost is about 40% of total premium collected) have sharply increased, and investment capital has dried up—tripling the cost of borrowing.

This situation is nothing new. Florida will always have good and bad cycles when it comes to the weather and insurance.

The good news is that elected representatives in Tallahassee have mechanisms that were put in place by their predecessors to mitigate the damage that would be caused by cyclical rate increases.

Legislative reforms during the current session could reduce this average rate increase by at least half, and could include:

  1. Repeal the rapid cash build-up factor for the Florida Hurricane Catastrophe Fund (FHCF). The Florida “Cat Fund” was designed to promote stability in the international reinsurance market. Years ago when the FHCF was depleted after eight hurricanes in two years, a 25% surcharge was placed on the price of reinsurance purchased through the fund to replenish cash in the fund so that it would have enough money to pay claims for a future rainy day. Today the FHCF has $13 billion of cash on hand to pay claims and will collect over $1 billion more this year. The total $14 billion is equal to all the claims paid by the FHCF in the 26 years since it was created. Repeal of this rainy-day surcharge would pass about $350 million back to insurance consumers and reduce the average rate increase by 20%.
  2. Allow the Cat Fund to offer an additional $4 billion in coverage through a temporary layer of reinsurance that would offer about $600 million in savings that again would be passed on to insurance consumers. Companies would be able to buy more reinsurance from the FHCF instead of the private market. This would also increase capacity and lower private reinsurance costs. This reform would reduce the average rate increase by another 40%.
  3. An additional and temporary measure that the legislature could take is to provide short-term loans that would replace existing debt. According to the rating agency Demotech, this reform (which has been employed by the legislature in the past) would allow at least six Florida-based carriers to provide their policyholders with lower rates. It would also help keep this market robust and competitive.
  4. We simply cannot ignore these expected rate increases. The Florida Legislature should use the existing policy levers to get in front of the problem.

Please call  Lee from Calles Financial at 954-270-7966, Your Insurance Consultant  about Home Insurance, Auto, Flood, Private Flood, Car, Life Insurance & Financial Products, Business  & Commercial Policies, and Group Products for business owners to give Employees benefits at no cost to the employer

Please enjoy the full link below.

https://myemail.constantcontact.com/NAIFA-Florida-Session-Dispatch-Week-3.html?soid=1118019259448&aid=52_cvHub5XU

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Two bills seeking to change the way Florida surplus lines business is handled are currently working their way through the Florida State Legislature and advocates say the potential laws could bring much needed efficiency to the state’s surplus lines market.

The bills – Senate 538 and House Bill 387 – propose small changes with potentially large effects on Florida surplus lines agents. The bills were introduced by Senator Jeff Brandes, R- St. Petersburg, and Representative Colleen Burton, R-Florida, respectively.

Please enjoy the full article below;

https://www.insurancejournal.com/news/southeast/2019/04/09/523091.htm

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Florida Chief Financial Officer (CFO) Jimmy Patronis has announced a new initiative aimed at reducing fraud in the state.

According to a statement from the Florida Department of Financial Services, the “Fraud Free Florida” initiative will work to better coordinate collective investigative efforts to protect Florida’s large population, especially seniors, from “scam artists.”

“Florida currently ranks first in fraud and second in identity theft nationwide. In 2017, identity theft cost Americans nearly $905 million,” Patronis said. “This is unacceptable, and we must use innovative ways to stay two steps ahead of criminals who want to take your identity, steal money from families who need it, and prey on vulnerable Floridians.”

Fraud Free Florida will bring together statewide law enforcement officials, local state attorneys, private sector stakeholders, and members of CFO Patronis’ fraud investigative teams. The goal will be to help Florida stay ahead of new scams and take on fraud already taking place in the state including: fraud at unscrupulous opioid treatment centers, public assistance fraud, identity theft, and cybersecurity issues.

Patronis noted fraud is especially rampant after every hurricane, when “millions of dollars are stolen as crooks prey on Florida families in their time of need to make a quick buck.

https://www.insurancejournal.com/news/southeast/2019/03/05/519550.htm

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The push for assignment of benefits (AOB) reform in the 2019 Florida legislative session is in full swing, and the insurance industry and consumer advocates have pulled out all the stops to emphasize their contention that abuse of a policyholder benefit has led to a full-blown insurance crisis in the state.

Whether their efforts will be enough this year after six years of failed reform attempts remains to be seen. Lawmakers are weighing legislative options, but a bil

The industry isn’t giving up on what is its top issue in the 2019 session.

“We remain hopeful of the process and that members of the [Florida] Senate and House will work through the various issues that have been raised and will land on a piece of legislation that will be helpful for consumers and that actually address these issues,” said Michael Carlson, president of the Personal Insurance Federation of Florida (PIFF), which represents personal lines insurers in the state.

The AOB problem in Florida stems from unlicensed water remediation and roofing contractors who have homeowners sign over their insurance policy rights in exchange for repairs to their homes. The contractors, typically working with an attorney, file inflated or fake claims, and then pursue lawsuits against insurers when those claims are disputed or denied.

Florida’s one-way attorney fee statute, which the insurance industry, consumer advocates and the state’s insurance regulator agree is driving the AOB abuse, leaves insurers footing the bill for the inflated claims and the attorney fees if the insurer is found to have underpaid the claim by any amount.

“After six or seven years of this campaign to make changes and having looked at this issue from several different vantage points and a lot of data the industry has concluded this is an attorney fee-driven cottage industry,” said Carlson.

The current remedy supported by the industry and Florida’s insurance regulator was introduced by Florida Senator Doug Broxson, who chairs the Senate Banking & Insurance Committee. Senate Bill 122 would continue to allow policyholders and beneficiaries to recover attorney fees under Florida’s one-way attorney fee statute but would prohibit assignees from obtaining attorney fees.

l backed by the industry has already stalled in the Senate Banking & Insurance Committee.

 

Please enjoy the full article below;

https://www.insurancejournal.com/news/southeast/2019/02/28/518891.htm

 

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For the seventh year in a row, the Florida insurance industry, regulators, and consumer advocates will push for reforms to the state’s assignment of benefits issue that has now become an insurance crisis, according to a report from the Insurance Information Institute (I.I.I.)

“[Florida’s] legal environment has encouraged vendors and their attorneys to solicit unwarranted AOBs from tens of thousands of Floridians, conduct unnecessary or unnecessarily expensive work, then file tens of thousands of lawsuits against insurance companies that deny or dispute the claims,” the report says of the misuse of the policyholder protection known as AOB.

Michael Carlson, president of the Personal Insurance Federation of Florida, said the I.I.I. study underscores the global problem with AOBs in Florida, and highlights the “pernicious effects of our one-way fee law on our justice and insurance systems.”

“It is well past time for the [Florida] Legislature to fix this problem,” he said, noting a bill addressing attorney fees – Senate Bill 122 – has already been filed for 2019 Florida Legislative Session, which begins in March.

With rates rising and insurers pulling back in parts of the state where the abuse is most rampant, such as in South Florida, insurance leaders say the crisis must be addressed.

“The key issue at OIR [Office of Insurance Regulation] is the issue of AOB,” Florida Insurance Commissioner David Altmaier told attendees at the Florida Chamber of Commerce’s annual Insurance Summit in November. “It is an excessive litigation issue driven primarily by a loophole in the attorney fee statute … [it] is being used to the detriment of consumers.”

Please enjoy the full article below;

https://www.insurancejournal.com/news/southeast/2019/01/29/515957.htm

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