April 17, 2014

Insurance in Florida

Property insurance in Florida is a house of cards

Thanks to surpluses, Florida's insurance system is equipped to handle a small storm this year with ease. Beyond that, the pain cascades.

Mike Vogel | 6/25/2012

Floridians think of hurricanes in terms of Category 1 through 5, but the only thing that matters about a storm in terms of Florida’s ability to financially withstand one is the amount of damage it causes — insured losses. What Florida must worry about is the storm — or storm season — that begins to climb above $20 billion in insured losses. The risk of one storm causing that much damage is small — 1992’s Andrew was a 1-in-50 year event, a 2% probability. House of Cards But a few decent-sized storms in one season easily could rack up $20 billion in damages.

The structure of Florida’s insurance market means that the higher we climb past $20 billion in losses, the more likely it is that every policyholder in the state faces assessments and surcharges — taxes — that could increase by nearly half what Citizens’ policyholders pay in premiums and raise everyone else’s.

If Andrew, the only Cat 5 storm to strike Florida since 1935, struck again, it would deal a $57-billion loss, given inflation and how much more developed Miami has become, according to modeling company AIR Worldwide.

THE CAT FUND

Property insurance companies buy reinsurance from large, multinational insurance companies like Zurich Insurance Group in Bermuda so that they don’t carry all the risk for the potential losses they insure. In 1993, faced with the possibility that Florida insurers might not be able to get enough reinsurance, the state created the CAT fund. It’s become a source of cheap reinsurance for both Citizens and private insurers, charging only a third of what private reinsurance costs, which helps hold down Floridians’ premiums.
Exposure: $17.3 billion
Reserves: $8.6 billion

CITIZENS INSURANCE

The state-run insurer is Florida’s largest insurance company with 1.4 million insured (22% of the market). Citizens is actually three “pools” of risk — a higher-risk account for coastal residents, regular multiperil coverage statewide and commercial coverage for condo associations and others.
Exposure: $503 billion
Reserves: $6 billion

PRIVATE INSURANCE

While Citizens is the largest single property insurer in Florida, most Floridians — 78% — still have private property insurance. The five largest private insurers:
Universal: 587,000 (9.5%)
State Farm Florida: 491,000 (8%)
St. Johns: 174,00 (2.8%)
Security First: 147,000 (2.4%)
USAA: 142,000 (2.3%)

Wilma
Wilma (2005): $9.2 billion
Wilma
Katrina (2005): $597 million
Wilma
Charley (2004): $8.5 billion
Wilma
Andrew (1992): $23 billion

Digital Access

DIRECT DIGITAL ACCESS
Add digital to your current subscription, purchase a single ditgital issue, or start a new subscription to Florida Trend.

TABLE OF CONTENTS
An overview of the features and articles in this month's issue of Florida Trend.

ACCESS THIS ISSUE »

Florida Business News

Florida Trend Video Pick

Okeanos Explorer 2014
Okeanos Explorer 2014

ROV Deep Discoverer (D2) has arrived on the seafloor at site “Northwest Gulf Mid-Depth." Today (4/17/2014) the ROV will  visit two Monterrey shipwrecks. Deployment of the ROV is planned for 0930 Eastern, with D2 arriving at the seafloor around 1030. Live streaming will commence then. Click to watch the stream or go here for more info.

Earlier Videos | Viewpoints@FloridaTrend

Ballot Box

Amazon will begin charging Florida residents sales tax on May 1, 2014. How will this affect your online shopping at Amazon?

  • I will buy less from Amazon
  • This won't change my Amazon shopping
  • I don't shop at Amazon

See Results

Ballot Box
Subscribe