Florida House Passes Major Home Insurance Bill

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The Florida Senate and House both approved a massive overhaul of home insurance laws on Wednesday, sending the bill to Gov. Ron Desantis, who’s expected to sign it into law.

The new bill will create a $1 billion taxpayer-backed reinsurance program for insurance companies, among other measures. The fund would add to a $2 billion reinsurance program that lawmakers approved in May. 

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The move comes as the Sunshine State’s home insurance market is teetering after two hurricanes made landfall in Florida earlier this year. One of them, Hurricane Ian, could launch the state’s most expensive recovery, costing between $35 billion and $55 billion, according to estimates from Fitch Ratings.

But even before the storms hit, Florida’s home insurance market was struggling. At least six Florida carriers became insolvent this year, and insurance rating agency Demotech downgraded the ratings of 27 companies earlier this year. 

Because there are so few carriers, Florida homeowners have some of the most expensive premiums in the country — if they can even find a provider. Many turned to Citizens Property Insurance, the state-backed carrier of last resort. The provider topped 1 million policies this summer, a number not seen since 2014.

To hammer out a deal, Florida lawmakers convened Monday for a special session. The bill passed by the legislature represents major reforms for home insurance laws, something that has largely evaded lawmakers for years.  

The key feature of the bill, which passed 84 to 33 along party lines with Republican support, is the $1 billion reinsurance program backed by taxpayers. 

Rather than hold enough cash reserves on their own, most insurance companies rely on reinsurance policies to pay for homeowners’ claims in case of a concentrated crisis. But many reinsurance companies had started to walk away from the Florida market or raise rates, leaving the insurers exposed. Those rates could jump by a further 10 percent next year, especially in regions hit by natural catastrophes, according to Fitch Ratings.

Critics have said that the taxpayer-funded reinsurance program amounts to a bailout of insurance companies. “We are giving a gift to the insurance companies, and we are punishing the homeowners,” said Rep. Patricia Williams, a Democrat from Pompano Beach. 

The bill is seen largely as a measure to stabilize the market and will probably not lower premiums for homeowners, at least not immediately. 

The legislation also aims to cut back consumers’ reliance on Citizens. Those covered under Citizens would not be able to renew their coverage if they find a policy offer that’s within 20 percent of the cost of Citizens’ premiums, and would be forced to buy flood insurance, which the federal government provides at affordable rates through the National Flood Insurance Program.

To the delight of the insurance industry, the bill also limits homeowners’ and contractors’ ability to sue. Despite Florida representing only 9 percent of homeowners insurance claims nationwide, it accounts for 79 percent of all insurance lawsuits, per data from the Insurance Information Institute. The insurance industry has blamed Florida’s so-called roofer scams, in which contractors offer new roofs to homeowners — even if there was little damage — and sue insurance companies in hopes of getting a payout. 

Julia Echikson can be reached at jechikson@commercialobserver.com.