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  • What’s the plan to solve Florida’s property insurance crisis? – InsuranceNewsNet

What’s the plan to solve Florida’s property insurance crisis? – InsuranceNewsNet

By on August 24, 2022 0

You would think heads of state would choose their words more carefully when addressing the only property insurance rating agency that stands between our insurance crisis and a complete collapse of the lodging. Last name calls won’t win you friends or sway people, let alone create more affordable insurance options.

Last month the Demotech, Inc.a Ohiofinancial rating company, announced that it would downgrade the rating of 17 private insurers operating in Florida. The move prompted a strong backlash from state leaders, including counterproductive complaints to federal mortgage agencies about florida only rating agency in property insurance.

In his letter to Fannie Mae, Freddie Macand the Federal Housing Finance Agency, Florida Financial director Jimmy Patroniscalled Demotech, Inc. “a red rating agency”, playing “havoc in the financial lives of millions of Floridians”. This, from a guy who seems more interested in hitting President Biden and the IRS than finding a solution to a crisis that threatens the state’s housing market and the economy in general.

Critics against Demotech may have bought the state time. The ratings agency postponed its originally planned downgrades, but the complaints from the state’s chief financial officer do not really replace a comprehensive policy aimed at keeping property insurance viable and affordable.

FOR SUBSCRIBERS: Property insurance market in ‘very precarious position’ as hurricane season approaches

In 2019, Floridians paid $1,988, the average home insurance premium. Today it’s $4,231according to a Insurance Information Institute analysis. P&C insurance companies that still offer home insurance continue to be threatened with liquidation. Therefore, Citizens Property Insurance Corp.the state government-backed “last resort” insurer, is quickly becoming the only viable option.

“When the market is healthy, citizens become smaller as private companies take advantage of good market conditions,” Michael Peltiera Citizen spokesperson told the Post reporter Hanna Morse. “When the market is going through a tough time, we grow.”

As the state faces the climax of another hurricane season, the stakes couldn’t be much higher. Homeowners relying on federally backed mortgages need highly rated insurers to meet Fannie Mae and Freddie Mac insurance requirements. Lower ratings typically force policyholders to pay more for new coverage, especially for homeowners whose homes are paid for through federally backed mortgages.

Govt. Ron DeSantis convenes an extraordinary session to deal with the property insurance crisis

Granted, Governor DeSantis convened an extraordinary session of the Florida Legislature to deal with the crisis. The result was more money set aside for reinsurance to help struggling insurers, a move that was reinforced this month when the Florida Bureau of Insurance Regulations announced its intention to set up a temporary reinsurance agreement through Citizens Property Insurance Corp.to fortify insurers during the current storm season.

The arrangement meets an “exception” that allows struggling insurers to obtain reinsurance, money that would allow them to provide coverage and meet the requirements of federally backed mortgages. Unfortunately, the exceptions won’t help much if Demotech is forced to do more downgrades or departures Florida absolutely.

Worse still, the state’s efforts to deal with the crisis have not appeased the insurance industry, which still sees climate change and ongoing litigation as factors that Florida a risky place to do business. The special session that produced bills that favored the insurance industry over consumers was met with a collective “meh” by the industry.

FOR POLICYHOLDERS: Will the latest property insurance legislation go far enough to help florida owners?

It’s not like the state didn’t see it coming. Major insurance companies that offer bundled home and auto insurance policies in other states have dropped out Florida years ago, leaving owners here with smaller companies who may be willing to take the risk but need more help getting reinsurance from the state of Florida do this.

“I really think the only way to approach property insurance is with national catastrophe insurance similar to what the federal government did with flooding,” the state senator said. Lori BermanD-Delray Beach told the Post’s editorial board. “I hope the reassurance Band-Aid will work but I’m not convinced.”

Whether the solution is market-driven or government-run remains to be seen. But so far the only plan seems to be to hope we don’t have a hurricane.

If heads of state, like Patronis, are seriously considering addressing property insurance, they better take a more proactive approach with industry and the appropriate federal agencies. It is clear that simply reacting to events does not work. Complaining about the latest rating agency in place won’t help either.

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