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In yet another ominous sign for Florida’s failing property insurance market, Tampa-based Lighthouse Property Insurance Corp. lost its financial stability rating, which means it will likely be placed under state receivership and dissolved.

On Wednesday, ratings firm Demotech announced the withdrawal, effective Tuesday, of Lighthouse’s former A rating.

“Despite a substantial capital contribution in the fourth quarter 2021, the operating loss in 2021, which reflected the evaluation of losses and loss adjustment expenses associated with Hurricane Ida, resulted in a level of capitalization below what was needed to sustain [its stability rating] at the A level,” Demotech president Joseph Petrelli said in a brief news release.

Lighthouse reported having 13,200 policies in Florida at the end of 2021. Of those, 947 were in Broward, Palm Beach and Miami-Dade counties. Those policyholders will have to find new carriers or go into state-owned Citizens Property Insurance Corp. if the state Office of Insurance Regulation seeks a court order to put Lighthouse in receivership.

Hurricane Ida, the fifth-costliest hurricane on record, struck the Gulf Coast on its way toward the Northeastern United States. Lighthouse also wrote policies in Louisiana, North Carolina, South Carolina and Texas.

Demotech, in a letter signed last week by Petrelli and the company’s other top executives, warned Gov. Ron DeSantis, Senate President Wilton Simpson and House Speaker Chris Sprowls that failure to call a special session to address financial instability of the state’s insurance market would likely force Demotech to withdraw financial stability ratings of “a number” of companies.

Demotech withdrew Lighthouse’s stability rating just hours after DeSantis called a special session to address congressional redistricting but not the insurance crisis.

DeSantis later told reporters that he expected property insurance reform to be dealt with by the legislature “sometime this year” and possibly not until after the 2022 election in November. That’s when Sprowls, who refused to take up several reform bills considered in the Senate, will be replaced as House speaker.

Loss of Lighthouse’s rating follows failure of four Florida-based property insurers since April 2021.

In February, state officials announced that Orlando-based St. Johns Insurance, a former top-10 insurer with more than 200,000 policies as recently as 2019, went into receivership after losing its financial stability rating.

Slide, a newly formed insurer, agreed to absorb 147,000 of the St. Johns policies, preventing those homeowners from having to find new carriers willing to take them.

Earlier this month, about 37,000 customers of Avatar Property & Casualty weren’t so fortunate. They were given until April 13 to find new insurers after that company lost its rating.

A spokeswoman for the Florida Office of Insurance Regulation, which typically oversees initial steps in insurance company liquidations, did not immediately respond to a request for comment about the Lighthouse rating withdrawal.

But when an insurer loses its financial stability rating, “it’s highly likely that the state will put it into receivership,” said Paul Handerhan, president of the consumer-oriented watchdog group Florida Association for Insurance Reform.

Federally-backed mortgage guarantors such as Freddie Mac and Fannie Mae will not approve mortgage loans if properties are insured by carriers without Demotech’s A rating.

Together, about 50 Florida-based insurers reported more than $1 billion in operating losses in 2021. Insurers say the industry is being torn apart financially by severe weather claims, roof replacement claims, contractor fraud, and excessive litigation.

State records show that Lighthouse was sued 116 times in 2020 and 269 times in 2021. Since Jan. 1, 41 suits have been filed against the company.

More than 100,000 lawsuits were filed against Florida insurers last year. Florida accounts for 76% of all property insurance litigation in the country, state insurance regulators said last year.

Florida’s home insurance availability crisis continues to claim new victims, and worries are mounting that more companies could be declared insolvent as this year’s hurricane season draws near.

The industry’s financial storm clouds have prompted fears of collapsing companies and the massive growth of state-owned Citizens Property Insurance Corp., the insurer of last resort:

• Last week, the president and CEO of Demotech, which rates the financial stability of about 50 Florida-based insurers, sent a letter to the governor and leaders of the House and Senate imploring them to call a special session and enact reforms to stem financial losses and litigation. Without reforms, he said, Demotech will likely downgrade financial stability ratings of “a number” of insurers.
• About 37,000 customers of failed Avatar Property & Casualty are scrambling to find new insurers before losing coverage on April 13. But about 2,000 have open claims against the company that won’t be resolved for months. Just about all insurers, including state-run Citizens Property Insurance Corp., have underwriting guidelines disqualifying from coverage anyone with unresolved open claims.
• Meanwhile, Lexington Insurance Co., which specializes in covering homes with replacement values of $1 million or more, announced last week that it’s discontinuing its home insurance division, which will force 8,000 Florida property owners to find new insurers. Most of them are not eligible for Citizens, which only insures homes up to $700,000 in most parts of the state.

Last week, Gov. Ron DeSantis said he’d “welcome” a special session to enact insurance reforms, but indicated he would not call one on his own. Instead, he left the proposal up to leaders of the state Senate and House.

So far, there’s been no indication that Senate President Wilton Simpson and House Speaker Chris Sprowls plans to call a special session, said Sen. Jeff Brandes, a Tampa-area Republican who has repeatedly warned that the state faces an insurance crisis that could undermine Florida’s booming real estate market.

The Senate passed a bill in the recently completed regular session aimed at curbing the number of “free roof” claims and related lawsuits that insurers say are driving up costs for all of their customers. But the House refused to consider any major insurance reforms.

The foreboding letter

In Demotech’s March 23 letter to DeSantis, Simpson and Sprowls, five Demotech executives, including its president and co-founder Joesph Petrelli, warned that failure to enact reforms before the June 1 start of hurricane season would lead to grave consequences.

“The conditions of the property insurance marketplace in Florida are unsustainable,” the letter said, “and without the necessary corrective action, many Florida insurers will struggle to maintain adequate surplus, efficient capital sources will avoid the market, private reinsurance costs will become prohibitively expensive, and consumers will ultimately bear the cost.”

Longtime leaders in the insurance industry believe that some companies won’t have enough cash, financing, or investment capital to purchase reinsurance, which is required so insurance companies have the ability to cover claims likely to roll in after a 1-in-100-year storm event, such as a major hurricane.

Insurers that fail to maintain an adequate surplus of claims-paying capital could be declared insolvent by state insurance regulators, and their policyholders would likely be forced into Citizens.

Citizens’ growth always prompts worries: If it grows too much and cannot pay all claims after a major hurricane, assessments could be levied against nearly all insurance policies in the state to make up the shortfall.

Citizens, which was down to 419,000 policies in 2019, has been quickly swelling with new customers who can’t get covered in the private market. As of March 25, Citizens was up to 807,910 policies.

Four Florida-based insurers have been declared insolvent since April 2021. Many others have stopped writing policies in high-claims areas of the state, such as South Florida, and declined to renew policies covering older homes or homes with roofs older than 10 years.

Insolvencies could also result from Demotech withdrawing companies’ financial strength ratings or downgrading companies’ ratings from A for “acceptable” to S for “satisfactory.”

A downgrade effectively puts a company out of business, either by prompting state insurance regulators to declare the company insolvent and transfer it to a receiver, or, in the case of any rating lower than A, disqualifying the insurer from covering any property backed by a federal mortgage guarantor, such as Fannie Mae and Freddie Mac.

Demotech’s letter warned lawmakers to expect ratings downgrades if no special session is called. “If current market conditions remain in place, we anticipate that we will downgrade Financial Strength Ratings of a number of companies in the coming weeks,” the letter said.

Simpson has called the idea of a special session to address insurance “a possibility,” according to a March 11 statement relayed by a spokeswoman. Sprowls’ office on Monday did not respond to questions about a special session.

More companies might have to fail before the Senate and House leaders call a special session, Brandes said.

“Sometimes you have to force a crisis to get the legislature to act,” he said.

Replacement policies hard to find with open claims

A former Avatar policyholder says she’s already facing a crisis.

Mimi Bright, a homeowner in Parkland, has been trying to find coverage since learning her Avatar policy would expire in mid-April.

But she has an open damage claim with Avatar, and her agent told her that no insurer, including Citizens, will cover her until the claim is resolved.

That could take several months. Under terms of Avatar’s liquidation, the company’s open claims will be resolved by the Florida Insurance Guaranty Association, which is working its way through about 2,000 open Avatar claims.

She doesn’t understand why state law does not require Citizens to offer coverage to policyholders left in limbo when their insurers are declared insolvent. “The state should be doing something to protect consumers,” she said.

Despite what its underwriting guidelines say, Citizens is willing to cover Bright and other Avatar customers with open claims if they provide documentation that the claim has been submitted and repairs are in progress, says Citizens spokesman Michael Peltier and Kyle Ulrich, president and CEO of the Florida Association of Insurance Agents.

“Obviously, [the Avatar dissolution] happened quickly, and we will be as flexible as we can be,” Peltier said. Homeowners will have to provide proof, such as a repair contract showing that repairs have been scheduled or proof that the repair process is underway, he said.

Agents have to be tenacious and offer to provide the documentation, which could also include price estimates from contractors, Ulrich said.

Citizens, Ulrich says, understands that “It’s in no one’s interest to have homeowners go without coverage for a period of time.”

Corey Neal, executive director of the Florida Insurance Guaranty Association, said FIGA is willing to work with agents to provide information needed to help displaced homeowners secure replacement coverage.

Some private-market companies, and not just Citizens, will cover a stranded homeowner when FIGA or a policyholder’s agent reaches out, Neal said.

“If the underwriter wants more information about a loss, we’ll absolutely help them. One of our first priorities is to help find replacement coverage. Hardship claims go to the top of the list.”

The key, he said, is for agents not to accept “no” for an answer from a company’s underwriting staff and to appeal to a higher level, such as an underwriting department manager. Agents needing help can reach out to FIGA directly, he said.

Information about the Avatar liquidation can be found at avatar-liquidation.com.

Paul Handerhan, president of the consumer focused watchdog group, Federal Association for Insurance Reform, said consumers whose insurers decline to renew them also face difficulties finding replacement coverage if they have open claims.

“It’s becoming a real problem, especially with the growing number of non-renewals,” he said. Progressive Insurance recently announced plans not to renew 56,000 Florida homes with roofs older than 15 years.

FAIR would like to see a state law requiring Citizens to cover displaced policyholders with open claims. The law could allow Citizens to exclude the damaged section of those homes from coverage until repairs are complete.

Lexington pullout to affect wealthy

Lexington Insurance Co.’s decision to stop insuring private homes as of Aug. 1 could be a signal that costly claims are also affecting viability of the so-called surplus lines market that typically caters to wealthier clients with homes worth $1 million or more.

Most of Lexington’s policyholders don’t have the option to get coverage from Citizens because Citizens only insures homes with replacement values of $700,000 or less in all counties except Miami-Dade and Monroe, which caps eligible replacement values at $1 million.

Lexington told agents last week that it plans to terminate its personal lines coverage program as of Aug. 1.

Lexington’s parent company, AIG, declined to comment on the decision.

Handerhan said he was told that Lexington is pulling out of the homeowner market across the country.

Lexington insures 8,000 homes in the state with replacement values totaling more than $90 million, Handerhan said.

Ryan Papy, president of the Palmetto Bay-based Keyes Insurance agency said Lexington’s decision could prove costly to the growing number of Florida homes valued at $1 million or more.

Lexington customers who must look elsewhere will find “that market is almost empty,” Papy said, adding other surplus lines carriers, such as Chubb and Pure “have no appetite for new business.”

Cost increases “could be substantial — 100% to 200% even,” he said. “Maybe more.”

“The market turmoil is going to begin to affect a different type of customer,” he said of the wealthier homeowners. “That may push things closer to reform.”

Two men are facing charges for an alleged roofing scheme that targeted homeowners’ insurance companies across Southwest Florida following Hurricane Irma, officials said.

Brian Webb and Brandon Jourdan, 41, of Cape Coral are accused of convincing homeowners in Lee and Collier counties to submit claims to their home insurance companies with promises of a rebate that would cover their deductible,  according to Florida’s Chief Financial Officer Jimmy Patronis.

The two operated Webb Roofing & Construction LLC, court records show.

As part of the scheme, the pair allegedly enticed homeowners to submit a full roof replacement claim to their insurance related to damage allegedly caused by Hurricane Irma.

Webb and Jourdan are accused of telling their sales team to ‘solicit insured homeowners with a promise they can get them a new roof without paying the required homeowner’s deductible,’ Patronis reported.

The sales team was reportedly told to convince homeowners to submit claims for “damaged” roofs related to Hurricane Irma for full roof replacements.

As part of the con, employees had homeowners sign over their insurance claim rights and have them sign an ‘advertising agreement’ where they agreed to have signs placed in their yard, post positive reviews, and give referrals in exchange for the rebate or a credt towards the deductible amount.

Webb and Jourdan are facing nine felony counts of false & fraudulent insurance claims. They could each face a maximum sentence of up to a $45,000 fine and up to 45 years in prison.

Webb was booked into the Collier County Jail Tuesday. Jourdan was booked into the Lee County Jail on March 12 and released on bond a day later.

A judge set Webb’s bond at $45,000.

“Scam roofing schemes are driving up insurance rates for every Florida family and plaguing our state. There is no such thing as a free roof and if someone comes to your door offering rebates or kickbacks to file a roof claim on your behalf, report them to my office for fraud immediately,” Patronis said.

Florida homeowners will probably have to continue riding out a turbulent property insurance market on their own for the next year after state lawmakers ended their annual legislative session without enacting any reforms.

House and Senate leaders couldn’t agree during the roughly 60-day session on a solution to relieve homeowners of double-digit rate increases, so they passed nothing.

“Bottom line: Homeowners lost, and that’s what troubles me,” said Sen. Jim Boyd, R-Sarasota, who sponsored the main property insurance reform bill in the Senate.

Short of calling lawmakers back to Tallahassee for a special legislative session to address the problem — which some senators said was a possibility — homeowners can expect no new relief to their bills in 2022.

The property insurance industry is widely believed to be in crisis. Homeowners’ rates have been going up by double digits the last few years, and more than a dozen companies have recently suspended new business in Florida, limited the types of homes they cover or canceled policies outright. A handful of companies have gone out of business in the last two years.

Multiple lawmakers said this year that rising property insurance rates were one of the most common complaints they were hearing from constituents.

When asked Monday about the Legislature’s failure to pass a property insurance bill, Gov. Ron DeSantis pivoted to discuss the rising costs of inflation, which he has frequently blamed on President Joe Biden and Congress.

“I supported a lot of the stuff the Senate was talking about on a variety of these things,” said DeSantis, who is running for reelection this year. “I stand ready to do even more, but people should just be prepared: The gas, the groceries, utilities, all these things are going to go up in an era of fighting inflation.”

LOOKING TO ROOFS FOR A POSSIBLE SOLUTION

One issue lawmakers had hoped to tackle was the high number of roof replacement claims that industry executives say are partly to blame for rising prices. Many companies say they are now refusing to insure homes with older roofs as a result of the number of fraudulent roofers who are going door to door convincing homeowners that they can file a claim to have their roof replaced.

Last year, lawmakers tried to limit the types of advertisements roofers could offer, but a federal judge temporarily blocked it.

This year, Boyd’s Senate Bill 1728 would have required roofers to inform homeowners that they’re responsible for paying any deductibles and alert them that it’s illegal for a contractor to pay or rebate the cost of the deductible.

It also originally would have allowed insurers to offer policies that would only pay the depreciated value of the roof, or an “actual cash value” — an idea that would almost certainly leave Floridians with older homes footing most of the bill.

That idea was dropped in lieu of requiring homeowners to pay a 2% deductible for roof replacements, something considered more palatable to lawmakers. For a $400,000 home, for example, the homeowner would have had to pay a deductible of up to $8,000, or 2%, to replace a roof, with the insurer picking up the rest. The deductible would not have applied if the home was a total loss or if the roof was destroyed by a hurricane.

Replacing a shingle-roofed home can cost anywhere from about $9,000 to more than $25,000 depending on the size of the home and shape of the roof.

“It wouldn’t fix the problem, but we thought it would help the problem,” said Boyd, who is an insurance broker.

The Senate passed the bill, but House leadership wouldn’t accept it. On Thursday and Friday, with time running out for the legislative session, negotiations hinged on the House’s insistence on modifying the deductible plan. They wanted it to be optional for insurers, not mandatory.

It’s already optional for insurers, though, Boyd said. “It just wouldn’t have made any difference to the problem.”

House Speaker Chris Sprowls, R-Palm Harbor, said he had serious questions about the Senate’s 2% deductible plan, including whether it would make any difference to homeowners’ rates.

He raised a scenario of wind causing a tree to fall and destroy a homeowner’s roof.

“Does that mean you’ve got to pay 2% of your deductible, and really, it’s just sort of an act of God?” Sprowls said Monday. “I think that there’s a lot of issues like that.”

LITIGATION IS AN ISSUE

Sprowls also noted that lawmakers passed a property insurance bill last year, and that insurers say it takes 18 months for such reforms to make much effect.

“It’s frustrating for me as a homeowner. It’s frustrating for a lot of people,” Sprowls said of skyrocketing rates. “But I want to make sure that we’re making the right reforms that are going to have an impact on the marketplace and don’t inadvertently have an adverse impact on homeowners.”

There are several reasons why some insurers are struggling. According to a 2019 Florida Office of Insurance Regulation study, the state made up 8.16% of all homeowners’ claims in the country, but 76.45% of the nation’s lawsuits. The cost of reinsurance, which insurers buy to cover their claims, has gone up. And some companies that have gone out of business appear to have struggled for everyday business reasons.

The industry’s woes are affecting consumers directly. After Orlando-based St. Johns Insurance went into receivership last month, the Florida Insurance Guaranty Association approved adding a 1.3% increased assessment on all policies sold in the state.

To Joe Petrelli, CEO of Demotech, which rates Florida insurers, the proposed legislation didn’t go far enough to deal with the amount of litigation in the industry.

“Absent meaningful and significant tort reform, everything else is a drop in a bucket and a Band-Aid,” Petrelli said.

Without that reform, Petrelli said he didn’t see things improving for consumers any time soon.

“I think it’s going to be disastrous all the way around, for consumers, insurance companies, modeling companies, rating agencies, and, of course, regulators.”

Senate President Wilton Simpson, R-Trilby, said there is a “possibility” that lawmakers will return for a special legislative session. The last time the Legislature went into a special session over property insurance was 2007.

“We were disappointed we couldn’t get more done this year, but that’s part of the process,” Simpson said last week. “And so we decided it would be better for the next Legislature to take that issue up.”

St. Johns Policy Holders
 

Due to hurricane losses, fraudulent roof claims and excessive claims litigation St. Johns Insurance Company is now insolvent and will be liquidated by the Florida Department of Insurance.

Under the liquidation order starting on March1 2022, all of St. Johns Florida insurance policies are going to be cancelled and immediately transitioned to Slide Insurance Company.

Your Slide coverage will begin immediately and it will continue to provide the same coverage as your prior St Johns policy for the remainder of your current policy term.

There will be no gaps or changes in the terms of your new Slide policy. Your coverage and the premium will be exactly the same as your old  St. Johns policy.

When your replacement policy expires, you will receive an offer for a twelve month Slide policy. This renewal policy may have different terms of coverage and different premiums than the replacement policy.

Slide will notify your mortgage company, if you have one, and provide all required information. Slide will send your invoice to your mortgage company for payment.

How to Make a Payment
 

Call Slide Customer Service at (800) 748-2030.
 

Mail Payment to:                                                    Overnight payment:

Slide                                                                          Slide
PO Box 1779                                                            1516 Washington Street
Columbia, SC 29202-1779                                     Columbia, SC 29201

 

How to File a Claim
 

Claims incurred prior to March 1, 2022:

          Call: (877) 748-2059 or

          Customer Service: (800) 748-2030

Claims for losses on or after March 1,2022:

            Call Slide Insurance claims at (866) 230-3758 or

            Slide Insurance Customer Service at (800) 748-2030 or

            https://slideinsurance.com/stjohns/

Citizens plays a unique role in Florida’s property insurance market by providing coverage to eligible policyholders who can’t find it at comparable rates in the private market.

One reason Citizens is often the least expensive option is the way we’re built. Unlike a private insurance company, Citizens is required by law to levy assessments on its customers if funds set aside to pay claims have been exhausted after a major storm or series of less severe storms.

For Citizens policyholders, those assessments can be substantial. While Citizens remains in a strong financial position, it’s important that you understand the assessment process and how it impacts you.

Here’s how assessments work:

• If Citizens depletes its surplus and incurs a deficit, it must levy a Citizens Policyholder Surcharge of up to 15% per account for each of Citizens’ three accounts – the Personal Lines, Coastal and Commercial Lines accounts. If a deficit is incurred in each of the three accounts, policyholders would see a 45% surcharge. These surcharges are added to your annual premium.
• If a deficit remains in the Coastal Account after levying the Citizens Policyholder Surcharge, Citizens must levy a regular assessment of up to 2% assessable statewide premium (excluding Citizens’ policies), including homeowners, auto, specialty and surplus lines policies. This means, for example, that you could also see an increase on your automobile policy even though your auto is not insured with Citizens.
• If a deficit remains in the Personal Lines and Commercial Lines accounts, and in the Coastal Account after levying the 2% regular assessment, Citizens must levy an emergency assessment of up to 10% per account per year for each of Citizens’ three accounts of assessable statewide premium. This includes Citizens and private-market policyholders for as many years as necessary until the deficit is eliminated.

That can add up. For a single policy with a $3,000 premium, Citizens’ Policyholder Surcharge alone could mean an additional $1,350 charge when you may already be recovering from a catastrophic loss.

Don’t panic! Citizens purchases reinsurance and sell bonds to protect its $6.5 billion surplus and reduce the chance that its customers will be hit by a “hurricane tax” when they are least able to afford it. Since 2015, Citizens has had sufficient claims paying ability to handle a 1-in-100-year storm without having to seek assessments.

But the risk of assessment is real, especially as Citizens continues to see its policy count rise in the face of challenges in the private market. Citizens’ customers can reduce their assessment risk by finding coverage with another company. Talk to your agent, who is in the best position to help you find the option that best fits your needs.