With another Special Session of the Florida legislative set for later this month, Governor of the state Ron DeSantis has been outspoken on two key issues, one being reinsurance capital supply, the other the insurer of last resort Florida Citizens.
Speaking yesterday in Key Biscayne, Governor DeSantis highlighted the poor state of Florida’s property insurance market and some of the key issues faced, that also make it a less appealing marketplace for many of the largest insurers in the United States.
He explained that, “If you look nationwide, we have 8% of all claims, the state of Florida represents, but we have 78% of all litigation expenses.”
Going on to highlight cases where there might be a $50,000 award to a policyholder but attorney fees can reach into the many hundreds of thousands.
“We’ve seen that and we’re one of only a few states in the country that allows that type of thing to happen,” DeSantis said.
Adding, “So where are these other states, how are they doing things? These other states have more stable insurance markets.”
“It’s one thing to say we have more perils, so marginally premium will be higher here than some other part of the country,” he continued.
Saying, “I think we need reforms that are going to make our market look like markets that have been more stable and durable.”
He turned to the reinsurance market and noted that this global market has now been “tightened” and said that this is not just “Florida specific.”
He highlighted the RAP Fund, or Reinsurance to Assist Policyholders Fund, a $2 billion additional layer of state-backed reinsurance that was created after the last Special Session in May.
DeSantis noted that, without this extra reinsurance layer “you probably would have had many more companies going out of business.”
Then suggested that, “So, we’re going to look to see is there a way to do, they’d have to buy into it, I mean we’re not just gonna give it away, but can we, since we have such massive budget reserves right now, could we provide a bridge on reinsurance as the rest of our market starts to get better?”
Adding, “I think if we had a functioning market, there would actually be opportunities for companies to want to come in.”
He noted that solving the dysfunction of the Florida property insurance market is key, as the answer is not just pouring more policyholders into Citizens, the insurer of last resort.
“At the end of the day for a consumer, when you are the most empowered is when you can choose between, a half a dozen companies and they have to compete for your business.
“If you don’t have the ability to do that and you get dumped on the Citizens or something like that, well, then the consumer doesn’t have really any power,” DeSantis said.
Closing to say, “We need to have a functioning market and so we’re going to work to make sure that happens.”
As ever, the proof will be in the Special Session reforms that come out of the December 12th to 16th meetings of lawmakers in Florida’s Senate.
But DeSantis’ comments suggest the focus may be on eradicating one-way attorney fees, reducing litigation, and providing a further state-backed reinsurance solution, or extension, to bridge the period in which the Florida property insurance market begins to heal itself.
That will please the reinsurance and insurance-linked securities (ILS) market to a degree. Although they will not want to see additional subsidised reinsurance from the state used as a lever to soften pricing.
Risk commensurate, is likely to be a mantra next year.