Property insurance turmoil responds to climate change threats

Written by Monica Correa on August 9, 2022


More than half of Southern homeowners expect their homes to be damaged by weather linked to climate change in the next 30 years, just as home insurance turmoil and insecurity hit hundreds of thousands of landlords in Florida who lose their policy or pay a lot. more in premiums with insurers at risk of downgrading.

Florida is one of the states most susceptible to extreme heat and flooding. A Policygenious 2022 survey on climate change found that 52% of respondents in Southern states are concerned about extreme weather damage from climate change over the next 30 years, and 31% also plan to relocate due to extreme weather. .

“In recent years, Florida insurers have been hit by record losses from natural disasters, rising inflation, and unprecedented legal costs resulting from claims litigation, driving many insurers out of business in across the state or canceling policies to stay solvent,” said Pat Howard, property and casualty insurance expert at Policygenius.

When that happens, owners whose policies have been canceled scramble to acquire coverage from one of the state’s remaining companies, she added, “and those companies will often adopt more underwriting rules. stringent requirements, such as more stringent roof condition requirements, and will increase premiums to account for the additional risk.

An average rate increase of about 6.4% was approved June 30 by the Florida Office of Insurance Regulation for homeowners with property and casualty policies at several downgraded property insurers, according to Florida Realtors. Citizens Property Insurance policyholders will experience a premium increase by September 1

Nationally, 90% of owners saw their quoted annual premiums increase from May 2021 to May 2022, according to data from Policygenious.

Several home insurance companies are bankrupt or have interrupted or reduced their activities. Among the companies limiting their activities are American Traditions Insurance Company, based in Pinellas Park; Universal Property and Casualty, based in Fort Lauderdale; Progressive Home Insurance, which suspended new business in several Florida counties earlier this year; Monarch Insurance, canceling more than 68,000 policies in May; Heritage Insurance; Florida Agricultural Bureau; and Centauri Insurance and Bankers Insurance Group, which pulled out of the Florida market this year.

Several other insurance companies have become insolvent recently. Gulfstream became insolvent on August 27, 2021, affecting 32,324 policies; Avatar Insurance became insolvent on April 13, affecting 36,569 policies; Lighthouse became insolvent on May 28, affecting 27,244 policies; FedNat Insurance was insolvent as of June 29, affecting 65,442 policies; and Southern Fidelity became insolvent on June 15 with 78,000 policies affected, according to data from Citizens Property Insurance Corp.

According to insurance rating company Demotech’s Demotech Difference Magazine for the summer of 2022, the insolvency of these property and casualty insurers may leave policyholders in Florida no choice but to seek coverage from Citizens Property Insurance, their last resort.

Policyholder premiums are also rising at alarming rates, making it unaffordable for many people in Florida to own and maintain a home, as mortgage requirements, in most cases, involve having homeowners insurance.

About 17 insurance companies were facing a potential ratings downgrade from Demotech, which would negatively impact coverage for homeowners who depend on a good rating for their mortgage needs. Demotech recently delayed downgrades “until further notice,” according to its president, Joe Petrelli.

Florida Governor Ron DeSantis announced a temporary fix late last month, which would allow owners to keep their policies regardless of the company’s rating. State officials have argued that property insurers shouldn’t lose their A ratings because they’re financially stable, though a few reports may indicate otherwise.

“Given the high risk of hurricanes in Florida, insurers should place a lot of weight on the condition of your home’s roof or any other part of your home that is susceptible to high winds,” Howard said.

One way to make a home more insurable and potentially reduce a premium, she explained, would be to invest in resistance to wind damage. Florida insurance companies are required by the state to offer discounts for homes with wind attenuation features, such as hurricane-rated roofing materials, windows, and doors.

“Homeowners can also get discounts for bundling their home and auto insurance — buying both policies through one company — going paperless billing, installing security systems and increasing their deductible. “, she said. “While increasing your deductible is an effective way to reduce your home insurance premium, be careful not to increase it to an amount you cannot afford in the event of a claim.


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