For over three decades, Jim Tynan had his homeowners’ insurance with Allstate for his 1,200-square-foot condo in Ponte Vedra, Florida. However, in January, he received distressing news: his Allstate subsidiary was dropping his policy. In search of coverage, Tynan called ten different agencies, but none would accept him. Finally, he secured a new policy, but at the cost of a shocking 50% increase in premiums.
Florida has faced a relentless wave of hurricanes over the past four years, leading to soaring insurance costs and a retreat from coverage by some insurers. This dilemma leaves homeowners grappling with additional anxieties: will they still have insurance as they deal with the aftermath of storms or live near water? Though Tynan has not endured a hurricane’s direct impact, his proximity to the ocean instills a constant fear of receiving a cancellation notice from his new insurer.
After the latest hurricane, Tynan expressed his sentiment, “I live in fear of getting a letter from my new company saying they are dropping me too.” He is not alone; six other Florida homeowners, spread across various regions, echoed his concerns about potential rate hikes and exclusions. The lingering question is whether they might lose their insurance altogether.
In response to the mounting problems, Allstate stated it is collaborating with regulators to protect as many customers as possible. For those they cannot cover, Allstate is working to find alternative options through other carriers. Countless Florida homeowners now find themselves in a precarious position when it comes to securing adequate insurance. Between 2019 and 2023, average homeowner premiums in the state skyrocketed by nearly 60%. Major carriers have begun withdrawing coverage, intensifying the crisis. Citizens Property Insurance, the state-run insurer, has assumed an increased workload, now popular as a last-resort option for many.
Analysts and insurance specialists are predicting greater unease among insurers following the recent Hurricane Milton, which struck Florida just days after Hurricane Helene. “This is certainly going to provoke a reevaluation amongst insurers regarding their continued participation in the market,” remarked Marc Ragin, an associate professor of risk management and insurance at the University of Georgia.
The frequency of hurricanes raises concerns about reliance on Citizens, often viewed as an insurer of last resort. Florida Governor Ron DeSantis has publicly questioned the state-backed insurer’s ability to cover claims after a major storm. In a statement, Citizens spokesperson Michael Peltier reassured that the organization could pay claims, utilizing surcharges on policyholders and potentially assessments on non-policyholders if necessary. So far, the insurer has processed approximately 80,000 claims related to Hurricane Milton, with confidence in its ability to manage subsequent claims without imposing assessments on those not covered by Citizens.
As of June, Citizens had more than 1.2 million policies active, a significant rise from the approximately 1.14 million at the end of 2022. “We could foresee a situation where Citizens needs to absorb a substantial number of policies again,” cautioned Chai Gohil, a global insurance analyst from Neuberger Berman.
The back-to-back storms have heightened worries about inevitable price increases. Orion180’s founder and CEO Ken Gregg shared with Reuters, “The hope for a fragile market just vanished after the incidents involving Helene and Milton,” noting that these storms are bound to impact the reinsurance landscape in terms of pricing and availability. Brian Schneider from Fitch Ratings echoed this, stating that a spike in reinsurance costs forces primary insurance companies to adjust their pricing, especially for commercial policies.
Florida’s insurance landscape comprises a combination of longstanding firms, newer market entrants, and Citizens. Insurers like Orion180 are securing existing policies from Citizens in a “Depopulation Program,” aimed at transitioning policyholders back to private providers. Citizens, for its part, aims to reduce its active policy count to below one million by the end of 2024.
Despite the tumultuous weather conditions, several private insurers are reaffirming their commitment to Florida’s market. Notable players like State Farm Florida Insurance and Universal Property & Casualty Insurance indicate ongoing relationships with Florida homeowners. A State Farm representative assured commitment to the Florida insurance landscape, stating, “We plan to maintain our position in the marketplace.” Universal’s chief strategy officer, Arash Soleimani, echoed this sentiment, possibly lending stability to an otherwise shaky situation, declaring their unwavering dedication to Florida.
Some companies have begun scaling back their involvement. Progressive Insurance started reducing its exposure to high-risk regions in mid-2022 while still offering property insurance in Florida. In contrast, Farmers Insurance withdrew its own-branded coverage in the state but continues to serve clients through subsidiary brands. Travelers has taken a more cautionary approach, opting out of new underwritings in Florida until conditions change.
While the major insurers appear equipped to handle claims, the anxiety among homeowners continues to build. Sherri Hansen, a resident of the Florida Keys, captured the sentiment expressed by many: “We may be forced out of our home where we have lived for 35 years. All our eggs are in this one basket.”
As Florida residents confront the realities of rising insurance costs and uncertain coverage in the face of increasing hurricane activity, the state’s insurance market stands at a pivotal juncture. The narrative surrounding the balance between risk, pricing, and necessary coverage is crucial not just for homeowners but for the entire state, spotlighting the urgent need for innovative solutions in a climate that is changing rapidly.