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Insurance Hard Market

Insurance Hard Market

There are changes brewing for property insurance in Florida, especially coastal counties like Escambia, Santa Rosa, Okaloosa, Walton, and Bay Counties. For one thing, three of those counties have had direct impact from hurricanes in the past two seasons. Insurance companies are well aware of that and accounting for it. Their financial statements are trending in the wrong direction, which will likely have three effects- fewer insurance carrier choices, less coverage, and higher premiums. We call this a "Hard Market".


Fewer choices


Already this year, three of our top insurance companies have restricted who they will accept. For example, one insurance company used to accept a home with a 20 year old tile roof now only accepts 15 year old tile roofs. I asked an underwriter about this and he said that based on their data, a tile roof doesn’t perform any better in a hurricane than a shingle roof and will likely need a complete replacement. Since replacing a tile roof is typically more expensive than replacing a shingle roof, insurance companies are less likely to want them in the future or may charge more for them. Another insurance company will no longer accept anything built before 2010.


Minimum coverage amounts are another way insurance companies are limiting their applicants. Condos or homes with replacement cost under $250,000 have fewer choices than what we've had in the last few years. It seems like some insurance companies have done a cost-benefit analysis and decided on a minimum premium that some properties just will not qualify for.


Less Coverage


We have seen a few insurance companies restrict coverage on water damage especially. They are limiting the amount recoverable and the types of damage covered.  Insurance is meant to cover damage that is "sudden and accidental". A leaky pipe or mold growth has become a very litigious item, which inflates claim amounts and may prompt insurance companies to limit the recoverable amount within an insurance policy (sometimes under a "sublimit").


Water damage isn't the only thing, insurance companies will start looking


Higher premiums


As reported by under their recent article titled '"Florida's Property Insurance Market Is 'Spiraling Towards Collapse' Due to Litigation" , there are some troubling cost trends developing in the Florida property insurance market .


The article summarizes the issue well, stating:


"Among its findings:

  • Litigation frequency and severity represents an additional expense load of 17% (and rising) on all earned premiums for insurers in Florida compared with other catastrophe-prone states.
  • The fees paid to attorneys by Florida carriers far exceed the damages paid to the insureds.
  • In 2019 alone, Florida insurers paid almost $3 billion in lawsuit costs that translated into higher premiums for insureds.
  • Although the volume of claims after storms is a factor in costs, claims unrelated to catastrophes account for approximately 60% of all litigation.
  • Florida consumers are paying a “hidden tax” to fund the litigation that averaged about $680 per family in 2020."


From <>


It references analysis by Guy Fraker, an insurance consultant, which will be reviewed by the Florida Legislature. It is unclear what actions could be taken to help mitigate this trend but I am hopeful that at least we can eliminate some of the uncertainty around the insurance market right now. Insurance companies are risk averse and will charge extra for uncertainty


2021 has been one of the most difficult years in property insurance in recent memory. We are entering a Hard Market cycle where consumers have fewer choices, coverage restricts, and prices increase. This is probably a trend that will continue for a few years as the balance is restored. How that balance between risk and cost is restored, whether through private market action, litigation, or legislation, will determine how long we must endure this market and what it will cost. I'm optimistic that free market will eventually prevail and we will return to competitive rates, looser coverage, and more options.