The cost of reinsurance for Florida property insurers has increased over 100% in the past 4 years. It is projected that reinsurance will go up another 50% at the time of renewal on June 1^st.

If you’re wondering what reinsurance is It’s essentially insurance for insurers. It transfers risk to another company to reduce the likelihood of large payouts for a claim. It’s an extra layer of protection that allows insurers to remain solvent by recovering all or part of a payout.

This system worked great for a while, but now those reinsurance companies are much less interested in the potential risk that Florida property brings. Just in the past 6 years, over $807 billion (with a B) has been paid out in weather related disasters. So, as you can imagine, those reinsurers’ risk appetite for our beautiful state has diminished. The impact of that fallout will be different for each carrier, but significant rate increases are still expected.

From an insurance perspective, we had a rough year in 2022. Rates were at an all-time high, underwriting guidelines were more strict than ever, carriers were going out of business, and our home state was hit with some strong storms causing lots of damage.

Unfortunately for all of us, the reality is that yes it may get worse before it gets better. We expect this summer, typically the busiest time of year for real estate, to be tough when it comes to home insurance being attainable and affordable. We’ve weathered some major storms, quite literally, in the insurance industry before and well… this too shall pass. We also had two different reform bills passed last year giving us hope for change that will benefit all Florida residents moving forward. And it isn’t like we have a choice to avoid it since it’s still likely a required piece of home buying/selling transactions.

The good news is that we are in this together. We want to help get to closing and for all homeowners to feel confident that they’re adequately protected. Our biggest piece of advice to anyone looking to purchase a home is to START THE PROCESS EARLY when it comes to insurance!

Home insurance is an ever-changing topic of conversation sometimes positive and sometimes not so much. The last five years and the next five years to come have been and will be HUGE to the property insurance industry, thus impacting real estate drastically. Here is a recap of what we’ve seen and what we expect.

THE PAST FIVE YEARS:

• Litigation and fraud increased more than ever before, driving premiums up and causing at least 10 companies to go out of business or stop writing in Florida
• Underwriting guidelines became the most strict we’ve ever witness roofs have to be as new as 7 years old with some companies and risks are scrutinized with extra inspections and requirements
• It is estimated that since 2017, the four storms that hit Florida (Irma, Michael, Ian and Nicole) cost over $160 billion with a net loss for Florida property insurers of $3 billion causing insurance carriers to be unprofitable and reinsurers to question their risk appetite
• Homeowners are seeing rate increases of over 50%
• Policies, because they’re hard to come by, may be lacking coverage from what is typically recommended

THE NEXT FIVE YEARS:

• Citizens is no longer the insurer of last resort and is writing more business than ever, but will soon be requiring flood insurance on all policies, regardless of flood zone risk level
• The process of Assignment of Benefits (AOB) is no longer allowed for contractors to obtain rights to manage claims for the insured via a signed form
• One-way attorney fees are no longer permitted so the astronomical payouts from insurers will diminish significantly
• Two reinsurance funds were created in special session in 2022, which will help carriers still take on exposure
• We expect in the next 2-3 years, premiums will begin to level out and come down some although rates will remain competitive since there aren’t as many carrier options, our hope is that they come down a reasonable amount

It’s been a while since there was good news in the property insurance world but all of these are steps in the right direction that we can all be excited about. The end goal is to make insurance available and affordable for all Florida homeowners again.