‘Back from the brink of collapse’: Execs paint rosy picture of property insurance to Senators

A Senate panel heard positive commentary about Florida’s insurance industry from two of the sector’s most prominent names.

Michael Yaworsky, the Commissioner of Florida’s Office of Insurance Regulation, and Tim Cerio, the head of state-run Citizens Property Insurance Corp., told the Senate Banking and Insurance Committee that they see the industry as increasingly stable after years of tumult.

“We continue to see good news,” Yaworsky said regarding the sector.

He noted that the 7.5 million policies on force represent a growing market, despite stories that some people are going without property insurance, showing “most people are managing to afford insurance,” the cost of which has stabilized around $3,700 per household.

That includes 1.2 million policies approved for “takeout” from Citizens, which allows for “responsible” depopulation of the insurer of last resort and puts Citizens below a million policies for the first time in years. In this process, companies are increasing rates from “actuarially suppressed” levels from Citizens, he noted during questioning later on.

“We will see that takeout process continue,” Yaworsky predicted, indicating a “healthier market” with policies going to companies that can “absorb that risk” and demonstrate the “wherewithal” to do so.

Nine new companies are in the insurance sector, he said, and reforms passed by the Legislature have flattened increases to 0.8% year over year.

The sector is healthier and in growth mode, Yaworsky added.

“We have these legacy domestic carriers that have been in this state for a long time. We’re seeing infusion of capital into those companies and we’re seeing those companies that have survived learning lessons and beginning to grow again at a pace, which is what we want,” he said.

“We want companies that are long-standing participants in our states doing well. And again, understanding the market and knowing how to succeed in it over time for the benefit of everyone.”

The market’s health was reflected in how it weathered last year’s hurricanes, he argued, saying they ended up not being a “major stress point” as might have been the case in the past.

“If we were in 2022 and those storms had taken place and I was giving this presentation, we would be having a very different discussion about what the state of the market looked like,” Yaworsky predicted.

“We would undoubtedly have had a number of new insolvencies taking place. But today, with the reforms and other things that have in other marketing conditions that have stabilized, we’re at a place where those are very absorbable events. And we’re not expecting that to be a major blip in the process or impact future rate reductions in the coming year.”

Yaworsky noted that litigation is down roughly 30% since legislative reforms, which he sees as an encouraging sign, though “legacy litigation” from historic storms puts “noise in the system.” Pressed by Sen. Jason Pizzo on company-specific data, Yaworsky said the information was not available, suggesting that the Legislature would need to demand it.

“Some of it is trade secret,” the regulator noted.

Pizzo was unmollified, wanting the Legislature to know specific details about litigation rates for the companies in the market. Any briefing, Yaworsky noted, would have to protect the “trade secret” status of that proprietary information about legal disputes over claims.

Though not all information is clear to legislators, Yaworsky promised that companies are being monitored for compliance.

“This is a tremendous opportunity for companies to step up and show that in this post-tort reform environment they are capable of taking care of their customers. And if I find that they are not acting in compliance with the law, which is designed to protect consumers, they will pay dearly and not just monetarily. So we are watching very, very carefully what they are doing,” he said.

Cerio likewise argued that reforms have “brought the industry back from the brink of collapse.” With just over 936,000 policies on Citizens and further depopulation of roughly 300,000 expected this year, he is further encouraged. All told, Citizens represents roughly one-eighth of all insured properties, down from 17% of the market at its most recent height.

New business is slowing down for the state insurer as well, another sign of private market recovery. Less than 2% of policies come back to Citizens after depopulation, Cerio added. And depopulation is a statewide trend, with previous growth reversing amid an “appetite for takeout” by private companies that are more confident in the legal environment compared to before reform legislation from Tallahassee.

Home hardening, another priority of policymakers, has been effective in mitigating the value of claims and the impact on the market.

Regarding hurricanes last year, Cerio said the insurer has paid out roughly $823 million on more than 33,000 claims out of more than 76,000 filed total, with nearly 69,000 closed overall.

“Closed without a payment doesn’t necessarily mean the claim has been denied,” Cerio said, with more than 12,000 valid claims below the deductible, but with some combined with other claims.

Some claims may have been withdrawn, duplicated, or mistakenly filed with Citizens. All told, 10,665 were denied, adding up to about 31% closed without payment, with many denials because they were flood issues and not wind-created damage.

“We really have no financial incentive to not pay claims,” Cerio said, given the insurer’s nonprofit status and high regulation and scrutiny from the state. “We have every incentive to pay the valid claims of our policyholders as promptly as possible.”

Issues outside of Florida could impact the market, though, specifically the California wildfires.

“A few days ago, we didn’t think there would be a very big impact (on reinsurance),” Cerio said. But “in the next month or so,” he said new developments may come to light and adversely impact Florida costs.