Florida insurance at end-2023: litigation slows, open market grows

Florida homeowners slowed their rush to take insurers to court and private carriers took hold of an increasing share of the state’s property market as 2023 drew to a close, helping to fuel optimism from regulators that the strained market may be turning a corner. 

The leading indicator in Florida should be sought at courthouse doors. Floridians submitted 16,687 filings of their intent to sue insurers during Q4, down almost 19% on the prior quarter and down 28% from the Q2 peak, a dataset from Florida's Department of Financial Services showed. 

But by December, the monthly tally of intent to litigate filings had come down to 5100, a year-to-date low and just fractionally above levels seen in late 2022 when the prospect of tort reform motivated a last-minute rush to the courts. January 2023’s 45% monthly increase in submissions, immediately following passage of key bills, ultimately rendered a first quarter tally 74% above that from Q4 2022.

“There are emerging signals that the reforms signed into law are having a positive impact on Florida’s property insurance market,” authors of a semi-annual market stability report from the state's insurance regulatory office OIR wrote. 

Insurers are starting to concur. “The 2022-2023 reforms are already having a positive impact on Florida’s property insurance market,” Logan McFaddin, vice president of state government relations for the industry lobby group APCIA, said of the state of play. 

Regulators have deep dived on court records for their own signals of a waning in the Floridian litigious streak. Personal residential legal service of process (LSOP) filings against insurers ended 2023 at the low end of a three year range and the sub-group of LSOP filings with assignment of benefits clauses, now curtailed by law, has fallen to a six-year low. 

The legislation enacted in December 2022 eliminated Florida’s one-way attorney fee provisions on property insurance suits that protected plaintiffs from legal fees. Florida additionally eliminated all future assignment of benefits clauses as of January 1, 2023 for residential policies and in a roll-out beginning January 1 for commercial.

Critics of Florida's more liberal prior regime had argued that contractors armed with AOB agreements and backed by an army of lawyers had too much leverage. That left Florida with an overwhelming majority of the nation’s lawsuits, some 76% OIR had said, on a small 7% minority of the nation’s claims.

The current or incipient indicator of market health, talked up by market regulators, are signs of market revival, both from new local carriers on the market, including firms ready to pick up policies that had drifted into the hands of the state’s insurer of last resort, Citizens Property Insurance Corporation. 

Regulators take their optimism as the office “continues to engage with investors and insurers regarding future capital infusions, new company applications and acquisitions,” above and beyond the six property insurers already approved to operate in the state, regulators said in the semi-annual report released early January. 

The proof has been most visible in the depopulation efforts of Florida's residual market insurer Citizens Property Insurance Corporation (Citizens). OIR has approved take-out of some 650,399 policies during 2023, some nine times the prior year sum.

Citizens’ tally of policies in force peaked by September 2023 after 32 months of uninterrupted gains, but fell 12.7% from that peak during the fourth quarter to 1.23 million, a dataset from Citizens’ showed. Total exposure is down 10.6% to $552.6 billion from the September peak. Citizens’ started the year at 1.15 million policies and a forecast to run as high as 1.7 million by year-end, fuelled by a spate of firms put down or to run-off since early 2022. 

Regulators even hinted at “modest rate reductions” on the market, but offered only anecdotal evidence of rates on Citizens' take-out policies that would have fallen notably below the Citizens’ renewal offer, although that may have been measured against the mandatory increase on policies qualified for take-out. 

The still-missing indicator of market recovery has been black ink on the bottom line for the Florida property insurance industry. Also still-missing: national carriers – the only sub-segment of the market to turn the corner financially, but still only a tiny portion of the Florida market and largely disavowing new exposure to the Sunshine state. 

While those trends take hold or expand, Florida regulators are warning state policy makers against further tampering with the recovering market. 

“While OIR is optimistic about the impact of these reforms and the positive developments in the market, the Office renews its commitment to see the impacts of the reforms fully realised,” OIR authors wrote in the January semi-annual report. 

“The market must continue to organically recover, without fear of any major legislative or regulatory disruptions, in order to maximise the benefits of the reforms to Florida’s policyholders,” authors of the OIR semi-annual report argued. 

The insurance industry, in turn, fully agrees on protecting the legislative reforms enacted to date, but would press forward on parallel issues. 

The APCIA said it would devote its lobbying efforts in 2024 to cut into third-party litigation financing, a means by which third-party investor groups, often gathered in hedge fund format, bankroll plaintiffs or their lawyer groupings. APCIA slams the practice as “secretive and unregulated” and will press for registration requirements and fee caps on the industry to stave off the potential of “frivolous” lawsuits.

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