Larger P&C insurers in the Florida are likely to benefit from new reforms

Larger property and casualty insurers in the Florida market are likely to benefit from recently enacted tort reforms, and it remains to be seen how those changes will affect other carriers in the Sunshine State, according to S&P Global.

The Civil Remedies bill, signed into law by Gov. Ron DeSantis on March 24, is the type of legislation that insurers have been advocating for while navigating a litigation environment that DeSantis described as a judicial hellhole.

The new law eliminates one-way attorneys fees and fee multipliers, changes standards regarding comparative negligence and modifies bad-faith rules when insurers are sued.

The changes bring Florida more in line with other states in dealing with claims, which Piper Sandler analyst Paul Newsome said is a pretty significant improvement. What is not clear is how to quantify that improvement, given that the changes focus on litigation issues, rather than how claims are handled.

I haven’t found anybody who could give me a real number as to how big the improvement is. I think that’s still very much up in the air.

Piper Sandler analyst Paul Newsome

While the new law is designed to aid the market as a whole, the changes are a “straight-up benefit” for larger companies with a presence in Florida, such as Progressive, Allstate and State Farm Mutual Auto Insurance.

It is possible that benefits can be realized for smaller companies such as Heritage Insurance Holdings, United Insurance Holdings, HCI Group and Universal Insurance Holdings, as well as some privately run carriers that are kind of on the edge.

Larger P&C insurers in the Florida are likely to benefit from new reforms

Shares of United Insurance finished the week ending March 31 up 11.9%, while Heritage rose 4.07%, Universal slipped 0.16% and HCI fell 0.77%. Allstate rose 4.94% and Progressive rose 1.33%.

With litigation matters now addressed, attention should turn next to reinsurance.

In an emailed statement to S&P Global Market Intelligence, carriers are struggling to purchase adequate reinsurance ahead of the June 1 renewal season, which coincides with the start of the Atlantic hurricane season.

Miller said the Legislature and DeSantis need to step in with more state-sponsored reinsurance, which Miller referred to as a reinsurance bridge.

It could reduce homeowners rates about 15% versus the 30%+ rate increases we are seeing on top of the 2022 increases.

The Florida Office of Insurance Regulation took steps to address that issue in 2022 when it established the $3 billion Florida Optional Reinsurance Assistance program. Miller said $3 billion may sound like a lot, but it’s a small piece of what’s needed to reinsure all the risk in Florida.

Reinsurance issue ties in with relief promised by the litigation reform law because it is not clear whether reinsurers will give primary carriers credit for it in upcoming renewals. If those carriers are hit by large reinsurance rate increases, there will not be enough premium to go around.

by Tom Jacobs – analyst at S&P Global Market Intelligence