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Tuesday, April 25 2023

The fact trial lawyers have dumped tens of thousands of lawsuits into the Florida courts in March, just before the state’s tort reform legislative overhaul kicked in, adds another threat to the already challenged Florida insurance market, the Insurance Information Institute (Triple-I) has said.

While this isn’t strictly property insurance related, for Florida’s legal system the fact trial lawyers have filed a record 280,122 lawsuits between March 1st and March 23rd, in order to beat the state’s tort overhaul, has the potential to be a concern.

That deluge of cases was 126.9% higher than the previous record in May of 2021, the Florida Bar said.

Triple-I explains, “These lawyers see the writing on the wall. The days of outsized legal fees from filing frivolous claims against insurance providers are over.”

But adds, “This last-ditch effort by trial lawyers will likely further delay consumers from benefiting from the new reforms as the load of cases slowly makes its way through Florida’s court system.”

In fact, the Triple-I predicts that this deluge of Florida lawsuits could “create a historic backlog” and as a result this could ensure that “insurers shell out billions of dollars in legal fees for the foreseeable future.”

This would “further threaten Florida’s weakened insurance market,” the Triple-I believes, a market that currently still sees as many as 24 insurers facing the risk of insolvency.

“This will make it even harder for Florida’s insurance market to stabilize, which was the intent of the reforms in the first place,” the organisation explains.

A destabilised Florida insurance market can pressure already-weakened insurers, drive additional costs through the system, while also resulting in further reinsurance pressures as the perception of the health of Florida’s primary insurers may take longer to improve.

It’s expected that many of these legal cases would normally have been denied, or settled pre lawsuit, but given the tort reform deadline lawyers have sought to file cases to protect their clients.

One of the Senate sponsor of the tort reform law, Palm Coast Republican Travis Hutson, commented, “I think it proves to us that the system is kind of broken and we need to reform it. You’re seeing all these lawsuits being filed now and it’s going to shock the system for a little bit, but eventually it will work itself out and we’ll be able to move forward under the new provisions.”

There’s no visibility of how many cases were filed that are relevant to Florida’s property insurance marketplace. But we’re told that the industry should expect that cases related to property carriers will be among them and there may have been a flurry of lawsuits filed in relation to last year’s hurricane Ian as well.

Time will tell how those work through the system and whether this legal backlog creates any challenges through the rest of 2023.

Tuesday, April 18 2023

TALLAHASSEE — State insurance regulators last week signed off on a plan that will lead to policyholders throughout Florida paying extra on their bills because of property-insurer insolvencies.

Insurance Commissioner Mike Yaworsky issued an order that approved a request by the Florida Insurance Guaranty Association to collect a 1% emergency “assessment” to cover costs of claims.

Insurers will collect the assessments from policyholders starting in October and send the money to the Florida Insurance Guaranty Association, according to the order.

The assessment will come as property-insurance policyholders throughout the state face soaring premiums. Assessments also will be collected on a variety of types of other insurance policies, though they will not apply to auto insurance.

The Florida Insurance Guaranty Association, or FIGA, is a nonprofit agency created by the state to handle claims when insurers become insolvent. It has issued a series of assessments in recent years amid financial problems in the property-insurance industry. Seven property insurers have been deemed insolvent since early 2022.

FIGA’s board on March 31 approved seeking the emergency assessment after the insolvency of United Property & Casualty Insurance Co. That insolvency, which led to the appointment of a receiver for the company in February, is expected to lead to FIGA handling hundreds of millions of dollars in claims.

Under the plan approved last week by regulators, FIGA is borrowing $150 million in short-term financing to help pay claims.

It then will issue up to $750 million in revenue bonds to pay off the short-term financing and to pay remaining claims.

Money from the assessments will be used to pay off the bonds.

The FIGA website said the 1% assessment will continue until the “bonds have been paid in full.”

“The emergency assessment is necessary to secure funds for the payment of covered claims, to pay the reasonable costs to administer such claims, including claims resulting from insurance companies that have become insolvent or may become insolvent as a result of losses incurred due to hurricanes, including but not limited to Hurricanes Irma, Michael and Ian, and to secure bonds issued to generate revenues to pay claims,” FIGA Executive Director Corey Neal wrote in an April 4 letter to Yaworsky.

FIGA also collected a 0.7% assessment in 2022. It began collecting an additional 1.3% assessment on July 1, 2022, that is scheduled to end June 30, according to information on the agency’s website. In addition, policyholders are being hit this year with another 0.7% assessment that will end Dec. 31

Private property insurers have dropped hundreds of thousands of policies and sought large increases during the past two years because of financial problems. Along with resulting in FIGA assessments, the problems in the industry have led to explosive growth at the state-backed Citizens Property Insurance Corp.

Many state leaders have long warned that if Citizens does not have enough money to pay claims, it could have to collect assessments on policyholders throughout the state. Citizens, which had 1.248 million policies as of April 7, did not need to turn to assessments after last year’s Hurricane Ian and Hurricane Nicole.

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