Analysts at Fitch Ratings have pointed to continued performance deterioration and a decline in capitalization levels amongst Florida homeowners insurance specialists.
This is despite the most severe losses from the record 2020 hurricane season occurring outside of the Florida market, although they noted that losses from winter storms in Q1 2021 have caused a modest decline in surplus.
According to Fitch, Florida homeowners specialists generally remain vulnerable to large catastrophic events that generate losses in excess of reinsurance limits and a reduction of private reinsurance market capacity for any reason.
However, the two major state-sponsored re/insurance entities in Florida, Citizens Property Insurance Corporation (AA) and the Florida Hurricane Catastrophe Fund (FHCF, AA), are considered to be adequately positioned for the 2021 hurricane season.
Citizens’ risk profile and financial position remained strong in recent years, despite recent catastrophe activity in Florida, but the company experienced a recent rise in new policies in force.
Both Citizens and FHCF also benefit from access to premium assessments and debt-issuing capabilities in the event large losses exhaust existing claims-paying resources, Fitch observed.
For the last several years, Florida homeowners insurers cited rapid growth in litigation as a driver of higher losses, as the pace of Florida property damage claims that result in a lawsuit remain elevated relative to the broader US market.
However, a recent bill aims to reduce excessive litigation related to property insurance claims and, if approved, would moderate attorney fees, curtail the solicitation of claims by contractors to home owners, and provide insurers sufficient time after a claim notice to inspect a property before a lawsuit is filed.
Fitch believes this new measure is a step towards stabilizing the property market in Florida if the litigation rate can ultimately become more comparable with the broader US property market.