The Property Insurance Problem in Florida
Individuals considering the purchase of real estate in Florida should be aware that three major Florida insurance companies are currently facing closure. According to several recent report, more closures could potentially be on the way.
For quite some time policyholders in Florida have traditionally paid more money for less coverage in addition to higher deductibles and policy exclusions because of the hurricanes that have battered the Florida coastline in recent years.
The Florida State Legislature have proposed some solutions to remedy the problem; however many feel that they merely take a stab at the problem without offering any real remedy.
The real problems with the property insurance in Florida began in 2004. When the hurricane season of that year began there was well over $7.5 billion in cash from payments by policyholders accumulated over the past few years; years in which there had been no hurricane related claims. Over the last two years; however, there have been eight hurricanes and as a result the $7.7 billion cash reserve has been depleted. In addition, there is now a $3.5 billion deficit; which Florida residents must now cover. With another potentially dangerous hurricane season looming, it is anticipated that in the wake of additional hurricanes and storm losses, Florida residents could take a further punch for any possible future deficits.
As a direct result of the eight hurricanes that have battered Florida since 2004, home premiums have doubled. A whopping 27 insurers have completely pulled out of Florida, leaving 295,000 policyholders without insurance. And that was all before three major Florida insurers were declared to be insolvent.
It’s quite possible more problems could well be on the way with additional Florida based insurance companies. At the moment state insurance regulators are keeping mum on the subject. Reports and financial records; however, indicate that further insolvency is almost a sure bet.
Lawmakers continue to work at finding solutions to bailout out the tottering insurance industry in Florida; however, at the moment it would seem that any proposals that have been made would only shift the problem further onto the shoulders of Florida residents. The Citizens deficit, in particular, appears to be in major trouble. One suggested proposal? Rate increases for beach mansions and possibly second or vacation homes.
While it is difficult to discern exactly what will happen with the insurance industry in Florida, it would appear that one thing is quite certain; whatever occurs it could very well mean rate increases for residents, particularly those owning high-end or luxury properties.
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