Two Florida Insurance Companies Are Scaling Back Homeowner Policy Sales and Coverages

As we enter only the second week of hurricane season, two property insurance companies are scaling back homeowner policy sales and coverages, claiming that their vulnerability to natural disasters and flooding makes writing policies in some parts of Florida unsustainable. 

AIG and The Farmers Group joined a variety of other insurers in the decision to not write any new policies in certain areas of Florida. The past 18 months have seen 16 property insurance companies leave the Florida market altogether or stop writing new business in certain sections of the state.

AIG announced that they will no longer be writing policies for houses located along the Florida coastline while Farmers Group decided that they will not be writing any new policies in the state at all. Farmers issued a statement, explaining their reasons:

“With catastrophe costs at historically high levels and reconstruction costs continuing to climb, we implemented a pause on writing new homeowners policies to more effectively manage our risk exposure.”

″We’re seeing a trend of excessive losses when it comes to catastrophes across the US. And that’s whether it’s hurricanes, tornadoes, wildfires, convective summer storms,” Luis Sahagun, Farmers Insurance Spokesman, said.

Experts warn this is another blow to Florida’s already deeply troubled insurance market. According to Insurance Information Institute Spokesman, Mark Friedlander, the latest data shows replacement costs for insurance companies have increased by more than 55%. 

While costs and premiums are on the rise and insurers leaving the state, experts warn that the biggest issue for the Florida insurance market is the rapid growth of Citizens Property which is the state-backed insurer of last resort.

As Citizens Property absorbs customers from insurers leaving the state, it now has over 1.3 million customers and is projected to have 1.7 million policyholders by the end of 2023. As more insurers pull out of the state, homeowners insurance premiums will continue to rise. 

According to Friedlander, Floridians are already paying the highest average premium for insurance in the United States. He also stated that one major storm this hurricane season, could result in homeowners premiums skyrocketing once again and possibly lead to the collapse of Citizens Property.

″And if we were to be hit with one major storm or a series of storms, it could deplete their reserves,” Friedlander said in a recent Yahoo News article. ”What happens in that case, all Florida consumers are on the hook to help replenish those funds. Meaning every consumer that has a type of insurance product in Florida, whether it’s a property policy or an auto policy, would see a surcharge on their insurance bills for multiple years to help citizens replenish its reserves.”