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Fostering Growth: Assessing Florida’s Improving Property Insurance Market

As the hurricane season approaches with potentially volatile weather ahead, AM Best, a leading financial rating agency, released an optimistic report on Thursday highlighting signs of improvement in Florida’s property insurance market. The cautious optimism stems from a legislative overhaul passed in 2022 by lawmakers and Governor Ron DeSantis, aimed at shielding insurers from costly lawsuits. Additionally, there has been a notable decrease in the number of homeowners relying on the state’s Citizens Property Insurance Corp.

“While it is too early to declare victory in the Florida personal property market, the indicators are promising,” the report stated. “Legislative reforms and the decline in Citizens’ policies mark a positive step. Whether these favorable market results will continue remains to be seen, and managing hurricane risk is an ongoing challenge.”

During an online discussion hosted by AM Best, analysts and industry officials echoed the report’s cautious optimism, noting improved insurer profitability and a stable reinsurance market, which is crucial in Florida’s hurricane-prone environment. “Let’s hope this trend is sustainable into the future,” said Dave Newell, vice president of membership and industry relations at the Florida Association of Insurance Agents.

Homeowners have faced soaring insurance rates and policy cancellations in recent years due to the industry’s financial struggles. The AM Best report highlighted that premiums have doubled for typical homeowners, driven by frequent and severe weather-related losses, including Hurricane Ian in 2022. “To combat these challenges, carriers implemented significant rate increases, with the average Florida homeowners policy premium rising by 102% over the past three years,” the report noted. However, 2024 shows a positive signal, with some companies filing for marginal rate reductions.

The high rates and market instability led to explosive growth at Citizens, which has evolved from an insurer of last resort to the largest property insurer in Florida. Citizens’ policy count grew from 420,000 in 2019 to 1.4 million in September 2023 but has since decreased to 1.19 million through a “depopulation” program shifting policies back to the private market.

State officials have recently highlighted market improvements, with the Florida Office of Insurance Regulation noting that at least eight carriers have filed for rate decreases in 2024, and ten carriers have filed to keep rates stable. However, the impact on the over 7.4 million residential policies in the state remains to be seen.

The AM Best report concluded that while there are signs of stabilization, sustaining these conditions is crucial. The upcoming six-month hurricane season, starting Saturday, will be a significant test, with forecasters predicting a busier-than-average season due to warm ocean waters fueling severe storms. The report pointed out that Florida was relatively unscathed in 2023, with only Hurricane Idalia, which did not hit heavily populated areas. “The higher frequency of named storms forecasted for 2024 will test the resilience of Florida insurers and the sustainability of these positive market trends,” the report said.

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