Not just increased replacement costs, though that is an element, but increased risk from windstorms and other casualty losses. Insurers are not looking to write policies at currently approved rates. It will take increased state subsidized assumption of risk beyond the current amount. Its just common sense
Insurance is a weird business - companies do not know the actual cost of their product until 5-7 years AFTER the policy is sold (claims, litigation, etc.); and, companies must file their rates and get them approved by the state; so, it's a crap shoot. "Combined ratio" is a metric in the industry to define profitability: cost of writing and issuing policies + claims divided by policy premiums. See the next two links: U.S. : combined ratio P/C insurance industry | Statista. This shows US insurance companies profitable at a 97.5 combined ratio. Florida insurance market needs strong medicine. This shows property insurance companies in Florida with a 117.5 combined ratio - highly unprofitable. When the cost of doing business is higher than your revenue you either stop doing business (leave the state) or raise your prices. The "time bomb" in all of this is Citizens Insurance company (the insuror of "last resort" which is operated by the State of Florida). Rates on Citizens are arbitrarily low because politicians want to be the hero and deliver lower rates to the voters - sounds great, right? Wait until the next serious catastrophic storm comes through. You already pay a surcharge on all property insurance policies to support Citizens (i.e. you are subsidizing lower rates for others). This surcharge will balloon after the next significant insurance event occurs.
Didn't they "fix" the roofing scams of AOB back in 2019? Yet that's still going on. Florida Governor Signs AOB Reform Bill; Law to Take Effect July 1
This is true but I think it’s worth pointing out that lots of insurance carriers have combined ratios of higher than 100% but are still profitable because they are investing those premiums in the time between a policy is bound and when the claim is ultimately paid out - which like you said often takes years. I’m an underwriter for a large casualty carrier and my specific program is extremely profitable and we run a combined ratio of about 90%. Insurance companies make the lions share of their profits through investments.
Are you at liberty to share the generalized underwriting view of Florida’s prospective casualty risk? My understanding, and please correct me, is that casualty insurers have had decent years because we have not gotten hit directly too much in the last two years, but no way that can maintain, and that’s just windstorm risk.
There's more of a relationship between materials cost and rates than with housing values. I don't even think appraisals are widely used in determining replacement cost anymore either since '08.
I specialize in commercial general liability, contractors pollution and errors & omissions coverage for environmental contractors and engineers. So I don’t personally have much knowledge of property insurance. Property coverage, especially in Florida, is different in that they are subject to occasional catastrophes (flooding, fire, earthquake, tornado, hurricanes etc) that can devastate a book of business because it affects so many insureds simultaneously no matter how selectively a risk is chosen. And in Florida it’s a matter of when, not if that next hurricane is going to hit. All that to say that I think you are absolutely right. One bad year of storms, especially in south Florida where property values are higher, and it can ruin a carrier.
Agree with your comments overall. Yes, an insurance company can be profitable with a combined ratio over 100; but, it’s highly unlikely any insurance company is making money with a ratio of 117 which is the average for companies in Florida from 2016-2019. Rising interest rates will provide a better ROI for carriers as investments are usually conservative for the industry.
I’ve read more than one article that says the rates Florida owners pay is enough to pay claims. That the biggest issue is insurance companies are using Florida insurance money to pay damages in other states where insurance is cheaper. If insurance was specific to each state Florida would be fine and rates would go down. Now my questions are,,, Is it true about money being sent to pay other state losses? And Is Citizen a Florida insurance only?
If anything it would be the other way around. Florida is a drag on other markets, that's why any number of insurers have left the state. The bigger insurers have separate Florida companies in some cases.
On a side note, if this is what is down the line, then... ‘Left with nothing.’ Survivors of Surfside condo collapse seek more settlement money (msn.com) Live today, pay tomorrow.
