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Hopes and despair in the Florida property market

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Bermuda reinsurers are keeping a close eye on ballooning property insurance rates in Florida, downgrades to the state’s property insurers precipitated in part by insurance fraud and expensive litigation, all in the path of another above average hurricane season that observers fear could collectively crush the property market in Florida.

Bermuda companies are the major suppliers of property catastrophe reinsurance for Florida’s property writers.

A virtual crisis is already the state of play, with Florida homeowners facing annual insurance premium increases of more than 20 per cent.

By 2019, the US Census Bureau's American Housing Survey, had estimated that nearly 13 per cent of owner-occupied homes in Florida had no insurance. That was twice the national average.

The National Association of Insurance Commissioners said Florida had some of the highest homeowner premiums in the country since 2016 – costing homeowners $1,918 annually.

Compared with the national average, Floridians were then paying $726 more per year. But the risks for homeowners have continued to grow, because since then, the situation has worsened.

Property insurance rates are soaring, because of fraud, and high litigation claims – 117,00 property claims filed for litigation in 2021 in Florida, while only 900 were filed in all other US states.

More than a handful of property insurers in Florida are already in liquidation, others seem on the edge and some homeowners have seen a tripling of their premiums in the past two years.

One ray of sunshine, said Joseph Petrelli, president of rating agency Demotech Ltd, is that the Florida governor has ordered a previously unscheduled session of the legislature next month to seek emergency and long-term solutions.

Mr Petrelli said in a video interview last week that many were hoping for reform of the state’s insurance industry.

He wrote to legislators and the Governor seeking action.

He said that one senator had tried and failed at a statutory remedy.

He added that an above average hurricane year could bring hundreds of thousands of fresh claims.

And Bermuda property reinsurers, he said, would scrutinise developments in Florida before committing their capital.

Joseph Petrelli, the president of the financial analysis and consulting firm, Demotech (Photograph supplied)

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Published April 25, 2022 at 8:00 am (Updated April 27, 2022 at 9:55 am)

Hopes and despair in the Florida property market

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