FedNat Canceling 68,200 FL Home Insurance Policies; "This Is Not A Survivable Market"

[hatrack]

Three years ago, FedNat Insurance Co. decided it was smart business strategy to expand deeper into the South to diversify its coverage area. But in 2020 and 2021, major storms hit Louisiana and Texas, and the Florida-based property insurer lost tens of millions of dollars. Now the impact of those storms is being felt in Florida. On June 29, FedNat will cancel 68,200 homeowners’ policies in the state.

FedNat’s pullback is the latest in a stunning series of insurance cancellations, nonrenewals and company liquidations that have left Florida residents struggling to find coverage at the start of a hurricane season that is projected to be unusually strong. Premiums are soaring, and experts say an insurance crisis threatens the state economy. “This is not a survivable market. Homeowners cannot find coverage,” Mark Friedlander, spokesperson for the Insurance Information Institute, said in a recent webinar. The webinar, hosted by credit rating agency AM Best, was about a Florida insurance market “in crisis.”

The retrenchment has forced hundreds of thousands of Florida residents to get coverage through the state insurer of last resort, Citizens Property Insurance Corp. The influx raises fears that a major hurricane would drain program reserves and require millions of residents to pay an insurance surcharge. Citizens’ policy count hit 883,000 in May. That’s more than double the 420,000 policies the program had three years ago, but well short of its record of 1.5 million policies in November 2011. The growth has accelerated in the past year and is expected to continue, undermining Citizens’ long effort to “depopulate” by moving policyholders to private-sector insurance.

EDIT

Florida-based insurers such as FedNat began writing homeowners’ policies in other states right as they were hit with major storms. The company expanded in Louisiana as the state was hit by Laura in 2020 and Ida in 2021, and in Texas as the state sustained major damage and power outages from the 2021 winter storm. FedNat said in a financial statement in November 2021 that its geographic expansion “was well-intended” but coincided with “the unprecedented number of catastrophe weather events that affected Texas and Louisiana over the past 15 months.”

Insurers recouped some losses through their reinsurance policies, which pay a share of catastrophic claims. But those payments prompted reinsurance companies to raise their rates sharply, leaving some primary insurers without the excess-loss coverage the state requires. Southern Fidelity Insurance Co., which insures 78,000 properties in Florida, was declared insolvent by the Florida Office of Insurance Regulation on June 9, after its reinsurance coverage expired and new coverage “was not accomplished,” according to a recent order. Southern Fidelity’s losses occurred even though it raised rates last year by an average of 84.5 percent and dropped 19,000 policies that were generating excessive claims.

EDIT

https://www.eenews.net/articles/this-is-not-a-survivable-market-insurance-crisis-hits-fla/

[Miguelito Loveless]

1. This is the start of a real estate collapse

More and more insurance companies will pull out of the hurricane zone, leaving even “last resort” insurance companies either bankrupt, or required to raise premiums out of reach of property owners. Mortgage companies REQUIRE insurance, so this will trigger foreclosures, dumping a lot of properties on the market at once, driving down prices, putting an end to the latest real estate bubble.

Oh, and who will write a mortgage on a property that cannot be insured?

If only someone had warned them. Oh wait, we did.

[jimfields33]

2. This is about roofs

First thing. It’s ridiculous how much it is to replace a roof. 18K for a 1975 square foot one story stucco home. Second it’s ridiculous that the insurance company is required to replace the roof due to hail damage. I think everyone should have the roof deprecate annually until 20 years when the insurance company pays nothing towards the roof. I get mine inspected tomorrow and may possibly only pay the 500 dollar deductible due to storm/wind damage. Is it any wonder why companies are leaving? My roof is 18 years old.

[Colbert]

3. Stay away from straw and sticks, use brick

It's a serious topic, so I really shouldn't be flippant. But while I have the right to remain silent, I don't possess the ability.

Use the correct building materials for the expected conditions

[Vogon_Glory]

4. The bean-counters say it: Climate Change is here

I wasted a long time arguing with right-wingers about climate change and one of the points I made was that insurance companies, some of the least radical members of the business community, have noticed the effects of climate change and were either boosting their rates or pulling out of the Florida/coastal market.

You can guess the outcome. My argument was ignored or I was called a Commie.

My experience has convinced me that right-wingers are incompetents when if comes to economics.

[Finishline42]

5. Climate change of +4C would be "uninsurable", says Axa chairman

If climate change raises average global temperatures to 4°C above pre-industrial levels, most assets would be uninsurable, Henri de Castries, chairman and CEO of Axa Group told an insurance seminar in Paris.

https://www.environmental-finance.com/content/news/climate-change-of-4c-would-be-uninsurable-says-axa-chairman.html

complete article is behind a paywall.