The two issues at the top of the agenda for lawmakers at next weeks Special Session of the legislature in Florida are reducing litigation and increasing the availability of reinsurance.
This is according to a proclamation by Kathleen Passidomo, President of the Florida Senat, and House Speaker Paul Renner.
With the Legislature of the State of Florida set to be in Special Session from Monday December 12th, through Friday 16th, the risk transfer industry will be pleased to see the state of Florida’s property insurance market and measures to improve it have received top-billing.
The proclamation lays out a list of items that the Legislature of Florida is meeting to consider legislation for, although no details on any bills have been proposed at this time.
Top of the list is considering measures to reduce the cost of litigation regarding property insurance claims.
Which is closely followed by measures to foster the availability of reinsurance for property insurance in Florida.
The first is the really critical item for the global insurance, reinsurance and insurance-linked securities (ILS) market.
While litigation remains as rife as it has been, the reinsurance and capital markets are unlikely to increase their appetites for Florida property insurance risk.
Solving the property insurance litigation crisis is necessary to restore confidence in Florida as a venue for deploying risk capital to.
As a result, solving the top priority on the proclamation list, by reducing litigation costs in property insurance claims, could ultimately prove to be the single measure that is required to foster the availability of reinsurance.
However, reducing litigation, which also needs fraudulent claims to be reduced, will take time no matter what measures and bills are enforced or passed, so additional measures to provide stop-gap reinsurance backed by the state are also likely to be discussed.
The next two measures are about improving claims handling in property insurance and modifying the deadlines for notices of claims, plus limiting the assignment of benefits under property insurance policies.
Again, both important to the industry, but solving the first one, on litigation, will go a long way to restoring confidence alone, we feel.
After that come prescribing property insurance requirements regarding alternative dispute processes, coverage options and agent practices, after which is increasing oversight of insurance market participants.
Next comes measures to improve the financial stability of Florida’s Citizens Property Insurance Corporation, the property insurer of last resort in the state.
Here lawmakers want to reduce the chance of assessments on policyholders in Florida and also foster the transition of Citizens policies back to the private market.
Pre-requisites for solving Citizens financial stability are likely to be the first two measures again, reducing litigation and making more reinsurance available.
On depopulation, or transitioning more policies back to the private market, that two requires reinsurance capital to regain an appetite for Florida property insurance risk, so again, the first two measures on the proclamation are essential.
There are four more items on the proclamation list, with two being related, in that they cover off tax relief after recent hurricanes Ian and Nicole, and mechanisms to support the Division of Emergency Management.
Next week is critical, as absent sufficient reforms to tackle litigation and fraud, as well as reigning in assignment of benefits (AOB), private reinsurance capital is unlikely to recover sufficient appetite to make next year’s Florida renewals any easier.
Florida’s Chief Financial Officer Jimmy Patronis has put AOB firmly on his agenda, saying he wants to “eliminate” them completely. On the other issues, of litigation, reinsurance and Citizens, Patronis seems to be in alignment.
Given reinsurance rates are hardening outside Florida and the US, if this Special Session doesn’t deliver the results needed, the June 2023 renewals could see far less capacity available to support Florida’s property insurers.
So if sufficient reforms are not passed to address these issues, the Legislature will have failed and the Florida property insurance crisis will continue.
It’s make or break time, so it is encouraging to see the two key and interrelated issues at the top of the agenda.