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“Public policy initiatives need to consider how to make Florida attractive to national insurers and reinsurers, to incentivize them to expand their appetite for Florida risks,” said Sridhar Manyem, director, industry research and analytics, AM Best, in a media statement announcing the commentary. “Absent that, a lack of competition may continue to fuel affordability issues for primary insurers with respect to reinsurance and consumers in need of basic homeowners’ coverage.”

Blades added: “Although claims stemming from Hurricane Ian at this point are lower than that of 2017’s Hurricane Irma, the rising reinsurance costs could reach a breaking point for many primary insurers in June 2023, when Florida property-catastrophe reinsurance programs are scheduled for renewal.”

The report describes reforms signed into law this year following a May 2022 special session. Those included establishment of the “Reinsurance to Assist Policyholders” (RAP) program. The RAP provides $2 billion of reinsurance coverage to insurers at no cost in exchange for lower premiums for policyholders. Sitting below reinsurance coverage from the Florida Hurricane Catastrophe Fund, the RAP coverage is available in the event of a hurricane, the report says. AM Best adds that while the rate reduction requirement may provide some relief for consumers, it does not address rate inadequacy issues driven by litigation, worsening weather activity, and escalating reinsurance pricing.

Other reforms passed at the May session prohibited awards of attorneys’ fees to an assignee in AOB litigation, and curbing the use of contingency fee multipliers in fee awards. Both fell short of repealing a one-way attorney’s fee rule in the state (which permits policyholders filing lawsuits to recover legal costs when they prevail in court but prohibits insurers from doing the same). Echoing what many insurers and defense attorneys have said for years, AM Best described the one-way rule as “the driving force of behind the litigation crisis in Florida.”

Reinsurers have shown by their actions that they don’t think piecemeal measures will have a significant impact on social inflation.

“Some reinsurance companies have decided to drastically reduce their property cat exposures in Florida by shifting towards higher attachment points, lowering limits, and being more selective with respect to their cedents’ track records—despite a hardening market, with rate increases in the double digits,” the report reads.

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