The property insurance market’s tailspin continued Friday, with yet another insurance company having its financial security rating withdrawn.
Demotech, a consulting company that rates the financial health of insurance companies, pulled its rating for Avatar Property & Casualty Insurance Company, which underwrites thousands of homeowners and commercial property insurance policies in the state.
The fall of another major insurer underscores the dire rhetoric surrounding Florida’s property insurance market. Lawmakers and industry insiders alike have said the state’s property insurance market is in “freefall,” citing frequent and increasingly large rate increase filings from insurers of all sizes.
As a direct consequence, policy counts at Citizens Property Insurance Corp, the state-backed “insurer of last resort” have ballooned.
Last year, during discussions on a Citizens depopulation plan put forward by St. Petersburg Republican Sen. Jeff Brandes, experts warned that the fall of any two traditional property insurers could cause Citizens to cross 1.5 million policies. With that many policies, a major hurricane or natural disaster would tank the state’s finances.
At its current pace, a seven-figure policy count at Citizens is not fear-mongering.
The nonprofit currently has 777,000 policies — up from its 2020 low of 420,000 — and is adding about 5,000 more policies every week. Citizens would surpass 1 million policies by the end of the year if that rate holds.
It is almost certain to accelerate, however. St. John’s Insurance Corp. alone insures 177,000 Floridians. Demotech pulled its rating on Thursday, putting thousands of policyholders out of compliance with their mortgage lender.
In a Friday email to Florida Politics, an OIR spokesperson said the office “is working closely with St. Johns Insurance Company to facilitate options for consumers so they have continuous access to coverage.”
St. John’s Insurance Company, the eighth-largest property insurer in the state, was one of several insurers to go belly up this week. Lighthouse Property Insurance also crumbled Thursday, just days after United Property & Casualty paused policy writing in the state.
The bloodbath comes amid intense debate in the Legislature over how to stabilize the market.
The plan advancing through the Senate (SB 1728) would allow insurers to write policies that cover the cash value of older roofs rather than their replacement cost. Insurers, which are mostly required to write policies covering full replacement cost, claim that a plague of fraudulent and frivolous roof litigation is one of the key drivers of market instability.
Cash value policies aren’t popular in the House, however. House Speaker Chris Sprowls this week said he is not in favor of the strategy because of its potential impact on low- and fixed-income Floridians, many of whom couldn’t afford to cover the gap between the payout for an aging roof and the cost of a new one.
Still, Sprowls has not shut the door on the plan.
“I want to make sure people are compensated,” he told reporters on Wednesday. “If you get a hurricane, and you’ve got a senior citizen on a fixed income, I am cognizant of the fact that they may not be able to go and get a huge roof. I totally understand the arguments, so we’ll see how the conversation goes in the next several weeks.”
But Sen. Jason Brodeur, a Lake Mary Republican, brushed aside that point of view, contending people need to be more “serious” about setting aside money for repairs. He noted that drivers don’t expect their automobile insurance to cover the cost of new tires.
“These are not supposed to be warranties, they are supposed to be insurance policies,” Brodeur said.
Meanwhile, Senate President Wilton Simpson said property insurance remains a top priority for his chamber and that if lawmakers don’t pass legislation this year, then the Legislature will have “failed our citizens.”
Florida Politics reporter Christine Jordan Sexton contributed to this post.