Hurricane Milton will test Florida’s home insurance system

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Florida has been trying to get its property insurance house in order. Looks like it might topple anyway. Already in the wake of two hurricanes in recent months, the monstrous Hurricane Milton hitting Tampa could cause more than $60 billion in insured losses.

The problems in Florida’s homeowners insurance industry are well known. For a period of several years early this century, the state avoided any major direct hurricane impacts. But his luck has changed, and due to climate change, storms seem to be more potent.

Florida has 1,350 miles of coastline that is heavily developed and a total population of over 20 million. Additionally, property insurance claims have historically been highly litigious and prone to fraud in the Sunshine State, adding to costs.

The result was untenable enough that Florida enacted legislative changes to fix the legal process around insurance claims to discourage unwanted lawsuits and excessive attorney fees. Eight new private insurers recently entered the market, and according to the state insurance regulator, Florida insurers have reached the underwriting threshold in 2023 after heavy losses in previous years.

In the middle of all this is the Citizens Property Insurance Corporation, established by Florida in 2022 as an insurer of “last resort,” which has increasingly become the only option for many of the state’s residents. Despite efforts to “depopulate” — or attempts to shift policyholders to private providers — Citizens’ book of business has grown to more than 1.2 million out of a total of more than 7 million Florida homeowners policies .

The 2024 budget forecast will reach $1.5 billion in net income and $6 billion in surplus, an element that, combined with reinsurance, determines Citizen’s ability to pay claims. But a once-in-100-year event, he said, would result in $18 billion in losses, and his surplus would turn negative. Should Citizens go through its excess and other coverages, it must, under Florida law, charge additional fees to its customers and other insureds in the state.

The world is full of profit-seeking capital. But a warming planet may not be secured at any acceptable cost.

It is ironic that Florida may have become uninsurable just as its population grew, buoyed by wealthy refugees who wanted warm weather as well as low taxes, limited regulation and a high-growth economy. Perhaps some of this accomplished group can devise an insurance scheme that will work in a changing climate.

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