Jody Wright sits on the steps of her apartment after the roof was torn off when Hurricane Sally passed through the area on Sept. 17, 2020, in Perdido Key, on the northern Gulf Coast. Credit: Joe Raedle/Getty Images
Florida senators from both political parties came out swinging Monday – the opening day of the Legislature’s special session on the property insurance crisis – strongly suggesting state government has botched the state’s property-insurance marketplace and still cannot fix it.
Florida Sen. Jeff Brandes, Pinellas County Republican, who has long clamored for property-insurance reform, and others asked a blistering series of questions in the Senate Appropriations Committee about fixes proposed by Republican leadership that they consider inadequate.
“Is this the worst insurance market you’ve seen in your lifetime?” Brandes asked Sen. Jim Boyd, a Manatee-Hillsborough Republican and insurance professional sponsoring the Senate’s key proposals.
Boyd said it is the worst he has ever seen.
“Is it possible, even though based on this legislation if it passes, that rates will still increase going forward?” Brandes asked.
Again, Boyd answered yes, citing insurance rate hikes already in the works. He said the best of the reforms in his bills would take at least one and possibly two years to ease the insurance crisis.
“If 20 percent of the companies … cannot place reinsurance because they can’t get enough capacity to provide access, is it possible that we’ll be back in three, four weeks in another special session to save the life of, to pump the chest of those companies that are still going to fail?” Brandes asked Boyd.
“My hope is that won’t be the case,” Boyd said, yet conceded, “But I think we have to keep our eyes open and watch.”
Industry on ‘life support’
Sen. Doug Broxson, a northwest Florida Republican, asked Boyd to compare Florida’s insurance crisis with a patient’s health condition.
“We’ve been dancing around this issue for several years and not dealing with some hard facts. And here we are in special session, which is kind of a 9-1-1 call to our members and to the state,” Broxson said. “Would you say, if we were dealing with a patient here and there was an accident, are we dealing with a seriously injured patient, critical, or we’re entering life support?”
“It’s very serious,” Boyd answered. “Some carriers are on life support. Some are about to pull the plug. Others are in critical condition and without reform will go to life support and/or pull the plug.
“I don’t know that we could be in any worse position right now as Floridians than we are.”
The only Florida homeowners not at risk of losing coverage or paying higher premiums, Boyd said, are residents who own their homes outright with no mortgage and can afford to self-insure. Three experts told the Phoenix rates will continue to soar due to Florida’s intensifying vulnerability to severe weather, making insurance unaffordable or even unavailable for many residents.
Sen. Jason Pizzo, a Miami-Dade Democrat, stressed that Florida’s Office of Insurance Regulation has largely failed to produce “post-mortem” analyses of insurance-company failures, exposed in the Tampa Bay Times, and that its staff is substantially smaller than in several less populous states with fewer insurance risks than Florida.
“Post-mortems show … a lot of these insurance companies are sending dollars out the door, to other affiliates or subsidiaries or whatever, and basically stripping themselves, and then proceeding in forma pauperis [as potentially insolvent] saying I need a rate increase to stay solvent or viable. Does either one of your bills address the issue of that flow of funds that go flying out of some of these companies that render themselves insolvent by their own actions?” Pizzo asked Boyd.
Boyd said his bills do not specifically address that issue. Instead, he said, the Office of Insurance Regulation and the state Department of Financial Services have recently pledged to take “deeper dives” to understand the multitude of factors in insurance companies going bust in Florida.
Boyd’s bills would require that they do so, though Pizzo and others were skeptical how the provision would be enforced since it has long been required by statute.
‘A terrible, terrible provision’
Brandes also condemned a provision that forbids property insurance companies from refusing to cover homes with roofs older than 15 years. Insurers, and the reinsurance companies who help them pay large payouts, increasingly have refused to write policies on home with aging roofs, even those no older than seven years. Insurers and regulators allege that excessive payouts fueled by fraudulent roof-replacement claims are breaking the bank, although attorneys for claimants say that is false.
Brandes said the 15-year roof-age provision alone could sink the Legislature’s efforts to attract exiting reinsurance companies back into Florida’s turbulent insurance marketplace. Without adequate reinsurance, which has become painfully hard to secure in Florida, primary insurance companies do not have those larger companies to fall back on and cannot offer coverage.
“Roofs are the No. 1 problem facing the state, as far as litigation goes,” he said. “I am gravely concerned about the 15-year provision in this bill. If we agree that this patient has cancer, the 15-year provision is like sticking a cigarette in their mouth and putting them in a tanning bed.”
Brandes said insurers and reinsurers will balk, which could undermine the whole reform effort, and he blamed House leaders.
“It’s not a Senate provision. It’s not a governor’s provision. It’s a House provision that was negotiated as a part of this deal. But it’s a terrible, terrible provision that will have massive implications, not only in this market but in the broader reinsurance market, that disincentives them to write [policies] in this state and disincentivizes them to offer reasonable pricing in this state,” Brandes said.
If reinsurers, as widely forecast, refuse to insure Florida’s primary insurance companies, another 1 million or even 2 million Florida policies may get cancelled to reduce insurers’ exposure to risk when the Atlantic hurricane season starts June 1, leaving homeowners in harm’s way.
Brandes predicted lawmakers will have to reconvene in yet another special session in a few weeks to grapple with worse conditions than they face now.
“I in many ways see this industry as an industry that essentially has stage 4 cancer and is failing.,” he said. “Unfortunately, the solutions offered here are like we’re treating stage 1 cancer.”
Public subsidies for pricey second homes
Meanwhile, Brandes said Boyd’s negotiated package of bills fail to rein in explosive growth in the state-run Citizens Property Insurance Corp., which has doubled in volume in 18 months to absorb policyholders stranded by their private insurers.
“The other challenging thing we chose not to address in this bill is anything that deals with the radical growth of Citizens,” Brandes said. “[For one thing] we could have gotten rid of the second-home provision that allows hedge-fund owners in New York to go buy a million-dollar condo in the Keys and we get to pay for it with subsidized property insurance, but we didn’t. … It has $300 billion of liability, and that grows every single day.”
A provision allocating $150 million to the “My Safe Florida Home” program to issue $10,000 2:1 matching grants (about 15,000 of them) to Florida homeowners to “harden” their homes with weather-resistant features also drew scrutiny from Brandes.
“Have you reviewed any of the audits done on that provision that were done in 2010?” he asked Boyd.
“I have not,” Boyd answered.
“Some of the audits found that almost 80 percent of that work was done fraudulently. Is there any protection in place to ensure that we deal with the findings of that audit?” Brandes asked.
Boyd replied: “I would assume there should be, or there will be, and the administration of this fund and the resources we’re allocating for the administration should contemplate that, sure.”
Attempts to amend Boyd’s package of bills — which reflect an agreement made by legislative leaders and Gov. Ron DeSantis, all of them Republicans — were rebuffed. The full Senate will take them up Tuesday morning. The House will begin its deliberations on the bills in its appropriations committee Tuesday afternoon.
This report contains material added after the original report was published.
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