TAMPA, Fla. — As Florida homeowners wait for a special session on property insurance reform to convene in May, more and more insurance companies are facing trouble and homeowner’s premiums are going up while policies are getting dropped by the thousands.
As of May 1, seven property insurance companies in Florida are currently in liquidation due to financial losses. Several national companies have pulled out of the state, and for some still operating, their ratings are dropping — the latest is FedNat which has 152,000 policies in Florida.
“One of the largest insurers in the state Fednat Insurance Group out of the Sunrise area in South Florida, just did a filing with the SEC indicating they may no longer be able to continue to operate because their rating was downgraded,” said Mark Friedlander a spokesperson with the Insurance Information Institute.
The rating comes from Demotech, downgrading FedNat from an “A” or exceptional to an “S” substantial.
Their paperwork filed with the Securities Exchange Commission states “there is substantial doubt regarding its ability to continue as a going concern under generally accepted accounting principles.”
“That stops them from insuring homes that have federal mortgages and it also stops independent in most cases. It will stop independent agents from representing them,” Friedlander explained.
This follows Lighthouse Insurance receiving a “Not Rated” from Demotech, the lowest rating possible.
“Technically it's a domicile company in Louisiana,” Friedlander said. “That's a regulatory issue so the Louisiana Insurance Department took action against them or put them in receivership a couple of weeks ago, but they're a Florida company. They're based in Tampa, and they have about 27,000 Florida homeowners.”
Florida Strategic Insurance in Tampa Bay has about 3,000 policies with Lighthouse.
“Every single one has to be rewritten,” Florida Strategic Insurance partner Mike Puffer told ABC Action News.
RELATED: Lighthouse Homeowners insurance liquidation leaves customers in the lurch
On top of hundreds of thousands of customers getting dropped from their insurance policies for having older roofs, Puffer said many companies aren’t writing any new policies.
“As an agency, we're writing roughly 80% to 90% of our new business with Citizens,” Puffer explained. “The crazy thing is as Citizens is supposed to be the carrier of last resort, but they're again becoming, if they're not already, the largest insurance company in the state again.”
Citizens only covers homes valued up to $700,000. Puffer said homeowners are forced to go to the excess and surplus market for coverage that is often more expensive and doesn't cover as much because companies don't have to follow Florida guidelines.
We went to the state-backed Citizens Property Insurance Corporation to ask how they’re handling this weight of homeowners coming to them.
“Since March, we're adding about 6,000 new policies a week. And that has been described by our CEO it's kind of an unsustainable growth,” said Michael Peltier a spokesperson for Citizens. “We're, we're supposed to be the insurer of last resort, not the insurer's first choice.”
Peltier said their policies are up 55% from January 2021, now approaching a million policies.
But, it’s happened before.
“Back in 2012, Citizens had about a million, million and a half policies, so we were huge. Basically coming off a couple of years of storm seasons, you know, several years earlier,” Peltier explained. “10 years, we had no storms. Citizens saw our policy count go down from 1.5 million to about 400,000 and the private market was booming.”
But this hurricane season is predicted to be above average, which means claims could go up, and that cost could fall on all Floridians.
“If perchance a big storm would hit and would exhaust our ability to pay, Citizens is required to level surcharges on our policymakers,“ Peltier said. “And then if we, if a deficit is still there, then we have to levy assessments on Floridians, and that's the risk that we're trying to avoid.”
Citizens is waiting to hear back on a decision from the Office Of Insurance Regulation (OIR) on a rate increase of 11% in the coming year.
Legislators have not yet released any details on their drafted changes to legislation for the special session or if it will include any provisions for Citizens.
As for FedNat, they have submitted an action plan to OIR on how they plan to secure more funding.
We reached out to FedNat for comment but did not receive a response.
Friedlander said customers with them should not panic, but be prepared.
“It doesn't hurt to call your insurance agent say, ‘You know what, I want to play it safe. Could you get me some other quotes? Let me be prepared. Let's see who else will insure our home hopefully for a similar cost in the same level of coverage.’ And that's the key thing. Whatever you do, we tell consumers don't reduce your coverage.”
Friedlander said it’s a good idea for all homeowners to have their policy re-evaluated to make sure their home is entirely covered under the costs of current inflation.
“We've analyzed that home replacement costs have increased more than 16% year over year,” he explained. “So what's it going to cost more to insure your home today than it would have a year ago and you need to make sure you have the right level of what's called your dwelling coverage.”
UPDATES ON LIGHTHOUSE INSURANCE: (From the Insurance Information Institute)
- Lighthouse has been ordered into liquidation by a Louisiana judge. That is the next step following receivership. Policyholders were notified they have until May 29 to find new coverage.
- All outstanding claims will be covered the Florida Insurance Guaranty Association.
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