The passage of landmark property insurance reforms this month by the Florida Legislature, including an end to incentives for filing frivolous lawsuits, likely won’t be the last word on insurance reforms, industry insiders say.
In a recent news release, the Florida Association of Insurance Agents (FAIA) offered its view on why the newly passed reforms, which will end the application of the state’s one-way attorney fee provision on property insurance claims, were needed to stabilize the insurance market.
“Since 2018, frivolous litigation, fraud and unnecessary third-party claims involvement have led to 10 insurer insolvencies, hundreds of thousands of policy cancellations and non-renewals, substantially higher premiums and reduced coverages,” the release states.
One area that lawmakers are uncertain they got right, however, was Senate Bill 2-A’s expansion of options for Florida insurers to purchase reinsurance at “reasonable rates.” The establishment of the Florida Optional Reinsurance Assistance Program will provide $1 billion in general revenue and premiums paid by insurers to help insurers find affordable reinsurance rates, according to the Legislature’s analysis of the bill.
“One issue that many legislative leaders have said they’re just not sure they got right was the reinsurance piece,” Kyle Ulrich, president and CEO of the FAIA, told the Florida Record. “Many of them have said that in the coming months, it will be helpful to have a clearer picture about what the reinsurance market will look like moving forward.”
Reinsurance is the process by which insurance companies transfer some of their risk portfolios to third parties through financial arrangements.
Concerns have been expressed that the new law, which expands the use of the Florida Hurricane Catastrophe Fund, doesn’t provide enough coverage at the lower tiers and that the proposed pricing is higher than what insurers have been able to obtain in the private market, Ulrich said.
Lawmakers may end up making some modifications to the reinsurance provisions and what will be available from the catastrophe fund, he said.
But Ulrich credited the Legislature for meeting the moment in addressing the state’s property insurance calamity.
“The reforms were very comprehensive, especially as they relate to legal and attorney reform,” he said. “To be honest, those are reforms that I didn't probably believe would ever happen here in Florida. But it speaks to the crisis we are in.”