Florida earned partial credit on tort reform, but few benefit near-term
Florida may have earned partial credit from reinsurers on recent enactment of tort reform, but the benefits will be limited to a select group of insurers and costs could increase short-term until the legal reforms can prove their value, the top officer of re/insurance group Arch Capital has said.
“The market will give some credit, but not the full extent of it,” Arch Capital CEO Marc Grandisson told his company’s Q1 earnings call.
Short-term, the mass of litigants that rushed to courthouses ahead of reform enactment could spell near-term pain and adverse reserve development, he warned.
“You may have to make up for that,” the CEO said with a hint towards the outlook for market pricing.
Near-term benefits, if any arise, could be restricted to best performers. “Overall, the market will take sort of a view that it is not there at 100% and they will probably factor in who is more or less exposed to those and give credit to those less exposed.”
For broader longer-term gain, reinsurers “need to see that tort reform will take hold,” Grandisson said. “It’s going to take a while to work through.”
Florida legislators have made several major attempts to stem litigation, prompting a flood of last-minute courtroom entrants.
Reforms enacted at a special legislative session mid-December eliminated Florida's one-way attorney fee provisions on property insurance suits and eliminated assignment of benefits.
Those former legal provisions, critics claimed, had enabled an alliance of lawyers and contractors to flood the courts on their own without risk of legal fees for losses. Florida ends up with an overwhelming majority of the nation’s lawsuits on a small minority of the nation’s claims, critics claimed.
More recent legislation, enacted in March, took a broader shot at tort law. Anticipating a flood of rushed claims, authors of the bill made a last minute move to limit the avalanche by the giving the bill immediate effect, but many would-be litigants will have rushed all the harder.
Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
