TALLAHASSEE – As Florida lawmakers look to stabilize the ailing 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 total reinsurance prices are expected to rise more than 10 percent in 2023, pointing to losses from catastrophes like Hurricane Ian and “increasing frequency and severity of natural catastrophe losses.”
“Price increases will be strongest in the regions most affected by natural disasters in 2022, including Australia, Florida and France,” the rating agency said. “Hurricane Ian is likely to have caused $35 billion to $55 billion in insured losses, making it one of the costliest natural disasters of all time.”
In the analysis posted online, Fitch also said it expects stricter restrictions when reinsurance policies are renewed in 2023, while addressing the possibility that property insurers in Florida will not be able to buy all the reinsurance needed.
“Nonetheless, we believe demand for property catastrophe reinsurance will be broadly met during the 2023 renewal season, with the exception of Florida,” reads the analysis.
Reinsurance sold in a global market is essentially replacement coverage for insurers. It plays a critical role in Florida, as evidenced by the projected tens of billions of dollars in damage from Category 4 Hurricane Ian, which made landfall in southwest Florida on September 28 before crossing the state.
When property insurers’ losses reach certain thresholds, reinsurance coverage is triggered to support claims settlement. Reinsurance costs are factored into policyholder rates.
Property insurers in Florida rely on a combination of reinsurance purchased in the private market and the state Florida Hurricane Catastrophe Fund. As an example of the importance of reinsurance, the Florida Hurricane Catastrophe Fund estimated last month that it would incur $10 billion in losses from Ian.
Reinsurance costs and availability were an issue in the Florida market prior to Ian. During a special legislative session in May, lawmakers agreed to spend $2 billion of taxpayers’ money to temporarily provide insurers with additional reinsurance protection.
Gov. Ron DeSantis called the special session in May amid widespread troubles in the insurance industry, which have included homeowners losing policies and experiencing massive rate hikes. Meanwhile, some property insurers have defaulted and policies have been merged into the government-backed Citizens Property Insurance Corp. flown, which was founded as an insurer of last resort.
Problems persist, however, and lawmakers are set to hold another special session the week of December 12, which is expected to include further changes to try to empower insurers.
House Speaker Paul Renner, R-Palm Coast, said Tuesday lawmakers will consider a “kitchen sink of options” during the special session to try to stabilize the market and expand private coverage. He pointed out that those options could include spending extra money to help with reinsurance.
“It would be temporary and it has to depend on major reforms being implemented for us to actually fix the situation,” Renner told reporters. “I don’t want to get into a situation where we make new long-term taxpayer commitments to underwrite insurance. That’s not the goal. The goal is to have a healthy private market and then start depopulating (pulling out policies). ) Citizens, so we can get back to where we were not that many years ago, which is a healthy, dynamic market where people can’t go into cardiac arrest when they get their renewal bills.”