A Hard Market.

by Mary Williams Walsh.

The following was written and reported by Mary Williams Walsh, managing editor of News Items. As hurricane season approaches, we thought it would be a good idea to look at the status of Florida’s insurance market. She did the work. She wrote it up.

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In June, we wrote that reinsurers had finally achieved their long-sought “hard market,” meaning they can now raise their prices to keep pace with the risks they assume. The cost of claims has been rising, as climate-change-fueled disasters like hurricanes grow more destructive. For years reinsurers, which backstop primary insurers, weren’t able to charge enough to keep up with their growing exposure. But this year ushered in a hard market, and now they can.

Insurance can often change human behavior–so what effect is the hard market having on the ground? Florida is a good place to find out. There’s a lot going on, none of it pleasant for homeowners in a low-lying state at the western end of Hurricane Alley. A short list:

--Homeowners’ premiums are up by about 40 percent this year, according to the Insurance Information Institute, which says the average homeowners’ premium in Florida is now roughly three times the national average. One reason is the rising cost of reinsurance. 

–An estimated 15 percent of the state’s homeowners are now “going bare,” buying no coverage at all.

--Insurers are cutting back their Florida exposure, including Farmers Insurance, which said in July that it had to withdraw “to effectively manage risk.” 

--When the big nationwide insurers leave, Florida’s homeowners must depend on small and less well-capitalized insurers. They, in turn, rely heavily on reinsurance, but the price is up 60 percent or more this year. 

–Seven small-to-medium Florida homeowners’ insurers have gone broke in the last 18 months, leaving hundreds of thousands of policyholders empty-handed. Some people are still waiting for money to repair damage caused by Hurricane Irma, six years ago.