“Lexington’s decision to discontinue their program is a further reminder of the harsh market conditions we face today. Their portfolio is heavy in Florida, so it will lead to a reduction in overall capacity there,” said Rachel Salter, Burns & Wilcox, Regional Practice Leader, Gulf Region.
A slew of insurers have drastically reduced their capacity or exited the Florida real estate insurance market in recent years. Florida insurers have suffered cat losses and roof claims (mainly from hurricanes), as well as high litigation costs.
According to the National Association of Insurance Commissioners (NAIC), Florida is responsible for 76% of lawsuits in the United States, despite only 8% of claims. In particular, plaintiffs’ attorneys have focused on legislative loopholes surrounding sinkholes and benefit allocation, helping homeowners file first-party claims.
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Left to either fight or settle a massive wave of lawsuits, Florida real estate insurers have seen their lawsuit costs skyrocket. This has led to what many are calling a “real estate insurance crisis” with insurers either not renewing their policies or some have stopped writing new homeowners policies in the state.
At the end of April, more than 875,000 policies were in effect with the state-backed insurer, Citizens Property Insurance Corp. worth homeowners – many of whom used Lexington – in a hard bond.
In May, AM Best released a commentary entitled “Troubled Florida Property Market Members Under Immense Pressure,” explaining how insurers’ ability to take out reinsurance protection in Florida is declining. As a result, real estate insurers had to fine-tune their risk accumulation and focus on non-renewal to minimize their reinsurance needs, leaving some residents under- or uninsured.
To address these challenges, the Florida legislature recently met for a special session on property insurance, and two bills were passed. The first (CS/SB 2-D) created a $2 billion reinsurance fund to help insurers with their risk portfolios, and the second (SB 4-D) focused on building safety, with an entire section on the roof system. The legislature has also closed the problematic loopholes around sinkholes and benefits.
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While many insurers have changed their risk appetite in the state, Salter said Burns & Wilcox will “continue to provide the same creative market solutions and underwriting expertise that have always been on the table” in Florida and other cat-ridden, challenging property insurance states.
“Our London Market meetings recently ended on a positive note, where we have maintained high aggregate levels and even gained additional capacity in hard-to-place areas such as Florida,” she emphasized. “In addition to the London markets, we had extensive capacity from domestic partners and even support from our sister company Atain, an AM Best A-rated company.
“Our carriers have the utmost confidence in our program management and internally the practice group has developed procedures with regular checkpoints to ensure the programs remain profitable. This may not be the same story or message you hear from other brokers losing access to Lexington as a program. We will be happy to assist our partner agents with their Lexington customers and other new business opportunities.”