Florida homeowners could pay a 2% assessment on their insurance policies into 2024 and perhaps longer because of a series of insolvencies among property insurers, staffers of a state board overseeing insolvent insurers said Thursday.
The Florida Insurance Guaranty Association (FIGA), which oversees the assets and claims of insolvent property insurance companies, approved a 1.3% assessment in March to cover the claims of St. Johns Insurance Company, which went bankrupt in February, to take effect July 1. That will be on top of a 0.7% assessment applied to policies in October.
That assessment is slated to last until June 30, 2023, but could be extended for another year or even longer, as more insurers have fallen in the three months since FIGA last met. The latest came last week, when Southern Fidelity was ordered into liquidation.
FIGA executive director Corey Neal suggested the board meet again in 30 days to determine whether to extend the assessments and by how long. Two scenarios were floated: Borrow $140 million and extend the assessments by another year, or borrow $250 million and extend the assessments even longer. No action was taken Thursday but FIGA could act in 30 days after the extent of Southern Fidelity’s outstanding claims, and FIGA’s bonding capacity, are determined.
“The question is, do we have enough cash for our latest insolvency? And the answer is we don’t know,” Neal told the FIGA board. “The Southern Fidelity liquidation just happened last week and we really just need more time to digest it.”
Southern Fidelity is the fourth insurer to be liquidated this year, and lawmakers have scrambled to solve the issues that have beset the industry. After St. Johns, Avatar Property & Casualty Insurance Company and Lighthouse Property Insurance Corporation fell in March and April, respectively.
The Legislature met in a Special Session last month to pass a bill setting up a $2 billion state taxpayer-backed reinsurance fund to help shore up smaller insurers facing skyrocketing costs for reinsurance. The new law also put in place tort reform measures designed to limit attorney fees in some cases, which insurers argue is the main driver of their $1.5 billion in claims losses over the last two years.
Many of the policies will end up in Citizens Property Insurance Corporation, the state-run insurer designed to cover homes deemed too risky or too expensive by the private market. But as Citizens closes in on one million policies, some lawmakers are concerned it is taking on too much risk, and a large hurricane could push Citizens to impose assessments on not just its own customers but all homeowners in Florida.
Despite the new law, more companies could go bust, even without a major hurricane hitting Florida, and some in the industry expect the Legislature to impose more changes next year.
“It’s very likely that we’ll see the Legislature in Regular Session, which starts in March, taking up additional reforms to the market,” said FIGA general counsel Tim Meenan.