As most Floridians know, the price of property insurance has not come down. In fact, it has almost tripled in recent years. While many are quick to blame the macro trend of inflation for this increase, there are real facts with inherent consequences in the Florida market, which should be acknowledged by recent developments.
On September 28, 2022, Hurricane Ian made landfall on the west coast of Florida near the Fort Myers area. This monstrous storm left such an immense legacy of destruction that Hurricane Ian was declared Florida’s deadliest hurricane since 1935, the strongest since 2018, and the costliest on record. With total damages estimated at $115 billion to $120 billion, Hurricane Ian has become the catalyst for what is now one of Florida’s toughest property insurance markets.
In the days and weeks following the storm, the true value of the damage remained uncertain. Total losses were originally estimated at $50 billion to $60 billion. With the vast majority of these insurable damages, many insurers would have astronomical losses, established for reserves, to pay out. As losses were realized and continued to mount, insurers and their reinsurance partners (with most treaties renewed on January 1) began to fully understand that the cost of the storm would be far greater than expected It became clear that this would soon put many insurers out of business, and for those that survived, it would significantly affect their appetite and cost within the state.
When January 1st came around and the reinsurance treaties were renewed, we saw exactly that. Numerous insurers became insolvent or decided to cease doing business in Florida. The insurers that remained operational in the state decided to drastically reduce their capacity within the market. Capacity includes the availability of limits such as named windstorm (hurricanes), flood and total insurable values. Meanwhile, despite its history of storms, thousands of people and businesses continued to move to Florida each week. This influx increases the demand for new construction and existing properties that has not yet abated and, in fact, continues to increase. From an economic perspective, the large reduction in the supply and availability of capacity, along with fierce and growing demand for coverage, has resulted in a sharp increase in property insurance prices across the state. .
As the reality of the current market becomes apparent to the masses, there is no expectation that it will cool down anytime soon. Insurers have become extremely selective about the risks they take on and where they will deploy capacity. We anticipate that they will continue to do so until the ramifications of Hurricane Ian are fully in the rear view window, which could be another 12 to 24 months.
It is vitally important that, as an insured and business owner, you seek to understand the market and work with your broker to ensure that when quotes and professional forms are developed, whether as an owner or contractor, the cost of ownership/builders is at risk. Insurance is accurate from the start. Otherwise, the benefit of sound coverage is sacrificed when engineering a program at a specific/lower price point. Working with a construction-focused broker like American Global, who has a deep understanding of construction risk and key relationships across the market, will help you get the best results.
If you would like more information or are looking for a broker with extensive knowledge and creative solutions for the Florida market, visit American Global at: www.americanglobal.com or contact: [email protected].
