Florida continues to experience a crisis with property insurance as hurricane season’s height draws near. In the last two years, policies for more than 400,000 Floridians have been canceled, and the average premium has increased significantly. The Weekly” anchor Justin Warmoth sat down with Tom Cotton, owner of Hugh Cotton Insurance in Orlando, to discuss the effects a major hurricane would have on the ailing economy.
According to Cotton, “the impact it will have will depend on the storm’s intensity and duration. “S viral carriers could be in danger from a significant storm, like Wilma, Andrew, or something similar.”The crisis has several causes, but according to Cotton, excessive lawsuits resulting from roof repairs have been the main culprit. Just 8 16% of all homeowners’ claims filed with insurance providers nationwide in 2019 were made in Florida. However, Floridians brought 75% of the nation’s lawsuits against carriers.
“You’re still entitled to a new roof if your roof is destroyed by a hurricane, regardless of how old it is,” Cotton said. “The I sue is these individuals who prowl neighborhoods asking to inspect roofs. You have storm damage, I see. They th n travel to the South Carolina weather data center, enter the address there and roll it back until a supercell crosses. They emp oy that to obtain a new roof for you.
In addition to paying claims, Florida carriers spent over $1 billion on underwriting losses in 2021. As a res lt, several pages active in the state this year have stopped writing new policies, including five previously active carriers. According to Cotton, the government regulates insurance companies using premium-to-surplus ratios. “Their surplus must increase if their premium is increasing. Due to the outrageous litigation, the surplus has been completely depleted, so they must lower their premiums. They risk losing money if they don’t.”
After the state’s central rating agency, Demotech, forewarned of downgrades to roughly two dozen companies, Gov. Ron DeSantis called a special session of the Florida Legislature in May to pass insurance reforms. They developed a program call d RAP (Reinsurance to Assist Policyholders) that would stop a catastrophe, according to Cotton.
The real estate market would collapse, the mortgage lending market would collapse, and we would be in a real crisis if Demotech downgraded the carriers. The Florida Insurance Guaranty association, or FIGA, provides additional reinsurance the airlines might not have been able to purchase or might not have been able to afford when their reinsurance treaty is renewed. This is essentially a backstop that lawmakers passed.
Additionally, businesses will have access to Citizens Insurance Capital, a government-run insurer that administers more than 1 million policies. To avoid the crisis of a downer de, Cotton said, “It’s a temporary fix.” I didn’t mean Citizens to be a panacea or a final destination. It is intended to be a last-re ort market that doesn’t compete with the private market.