AM Best, an American credit rating agency, reports that hard times are ahead for Florida, despite new reforms in the real estate insurance industry.
In May 2022, state lawmakers introduced two bills that include a broad range of reforms regarding housing insurance and condominium insurance in particular.
These projects have two support programmes: the $2 billion Reinsurance to Assist Policyholders Programme or RAP and the $150 million Hurricane Insurance Assistance Programme.
Unfortunately, in the agency’s view, this assistance is not enough.
Regarding RAP, the agency points out that the programme with certain protection measures for consumers does not solve fundamental problems. One of these problems is the inadequately high premium percentages that insurance companies take into account for future potential expenses. It also points out the problem of overpriced reinsurance faced by insured persons.
Great attention in these reforms is paid to the issues of creating an open and understandable process of roof insurance for residential properties; the use of more clear and effective legal language for clients; and restrictions on the "success fee" and the compensation of the lawyers involved in the insurance contracts. However, the real ability of the Florida authorities to follow up on the implementation of new regulations is in question.
A major problem is the unreasonable lawsuits filed by insurers, often using highly questionable claims of breach of contract, in order to simply avoid responsibility for implementing commitments to a policyholder.
Insurance companies act dishonestly in relation to hurricane insurance. Roofs are the most common item in storm damage, but it's not uncommon for companies to try to avoid the obligations referring to the age of a home and its roofing, for example.
Despite the many positive features of the new reform packages, the majority of respondents asked by Reinsurance News express doubts that these reforms will be implemented in full during the upcoming years.
37.3% of respondents said that positive changes could come within one or two years. 16% of respondents said that it would take more than two years. 53.3% of respondents expect that at least a year will pass before any positive changes start to affect the market.
Only 10.7% of respondents expect positive changes over the next six months.
According to Reinsurance News, respondents are sure that the frequency of reinsurance will increase in the second half of 2022 due to the contract renewal period that occurs in the middle of the year.