How will Florida's latest insurance reforms impact P&C insurers?

Larger insurers stand to benefit but smaller companies face uncertain gains

How will Florida's latest insurance reforms impact P&C insurers?

Insurance News

By Mika Pangilinan

New tort reform laws recently signed into effect by Florida Governor Ron DeSantis are set to benefit larger property and casualty (P&C) insurers in the state, according to analysis by S&P Global Market Intelligence.

The reforms eliminate one-way attorney fees and fee multipliers. It also modifies bad-faith rules when insurers are sued, and changes standards regarding comparative negligence.

Signed into law on March 24, DeSantis said these changes are necessary to improve Florida’s litigation environment, which he described as a “judicial hellhole.”

Insurers also lauded the move, with several industry players stating that it will help address the affordability issues plaguing Florida’s property insurance market.

Now, a new report from S&P Global has identified the tort reforms as a beneficial move for the state’s larger P&C insurers such as Progressive, Allstate and State Farm. However, the question of whether smaller companies would reap the same benefits remains up in the air.

The report cited Piper Sandler analyst Paul Newsome, who noted that while the changes stand to bring a “pretty significant improvement,” it remains unclear how this should be quantified.

“I haven't found anybody who could give me a real number as to how big the improvement is,” Newsome told S&P Global. “I think that's still very much up in the air.”

According to Newsome, larger companies like Progressive, Allstate and State Farm will find Florida’s reforms to be a “straight-up benefit,” noting that “at least it's a profitability improvement in a state where they've lost a lot of money.”

The benefits can also be realized by smaller companies like Heritage Insurance Holdings, HCI Group, and Universal Insurance Holdings, Newsome added, as well as some privately run carriers that he described as “kind of on the edge.”

Heritage CEO Ernesto Jose Garateix had recently said during a Q4 2022 earnings call that the company’s strategy will remain unchanged until Florida’s new legislation impacts its financial results.

“I am cautiously optimistic that it will accomplish the goals of the legislature, our governor and the state CFO to stabilize the Florida property insurance market and curtail abusive claim practices,” Garateix said.

Concerns about reinsurance renewals

In addition to Newsome’s analysis, S&P Global also highlighted insights from insurance consultant and former Florida deputy insurance commissioner Lisa Miller, who raised concerns about the upcoming June 1 renewal season.

Miller said Florida-domiciled carriers are “struggling to purchase adequate reinsurance” ahead of the June 1 renewals and called on DeSantis and the state’s legislature to introduce more state-sponsored reinsurance to bridge the gap.

The $3 billion Florida Optional Reinsurance Assistance (FORA) program that was established in 2022 falls short of what is needed to reinsure all risk in Florida, Miller said further, noting that a state-sponsored “reinsurance bridge” could “reduce homeowners’ rates about 15% versus the 30%+ rate increases we are seeing on top of the 2022 increases.”

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