Hope on the Horizon for Florida Insurers?

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Despite recent hurricanes in Florida, continued insurance claims litigation, and steadily rising reinsurance rates, insurers and reinsurers have reason to be optimistic about the next few years.

Due to a variety of factors, including large loss events, the state is beginning to see developments which should strengthen building integrity and therefore, decrease catastrophic risk exposure. While incremental advances can be anticipated within as little as two years, the full impact will surely pay dividends over the next two decades. Thus, future risk modeling technologies should factor in the impact such benefits will yield for reinsurance purposes.

Risk modeling for commercial residential properties can expect a significant boost of confidence from reforms to the Condo Act (Fla. Stat. 718), announced after the May 2022 special legislative session. The tragic collapse of the Champlain Towers served as the catalyst, leading to Florida legislators’ and residents’ realization that hundreds of condo associations across the state were not properly funded and/or maintained.

The new legislation requires associations to conduct a comprehensive reserve study every decade and then maintain sufficient reserves so the association can afford major repairs based on anticipated life expectancy. Previously, condo associations were permitted to waive the statutory reserve funding and/or only partially fund its reserves if approved by association vote.

Associations will also be required to conduct milestone inspections to identify latent conditions that affect the structural integrity of the building. The milestone reports are required to be provided to all unit owners, and the association must commence repairs within a year if the inspection reveals that structural repairs are needed. These changes are long overdue for coastal high-rise condominium associations, which are among the most difficult and costly buildings to insure.

Another catastrophic event that may reveal a silver lining is Hurricane Ian. One of the most salient takeaways from aerial images of the barrier islands and the coastline along the West side of the peninsula was the drastically different condition of the remaining structures, depending upon the year of construction. The images demonstrate the efficacy of the state’s current building codes, as right next to buildings that Ian reduced to a slab, more recently constructed homes can be observed that are still fully intact.

As the demand for waterfront real estate remains resilient, new and recent purchasers of older homes will be less likely to try to save money by renovating, replacing older roofs, and/or installing impact windows. Many homeowners, developers, and investors will learn from Ian, and opt to rebuild in accordance with Florida’s current strict building code.

Florida citizens also took action at the voting polls to impact legislation to benefit building construction. The recent midterm elections included a constitutional amendment on the ballot to authorize and encourage new legislation incentivizing homeowners to perform improvements to protect homes from flooding. The amendment will prohibit the homeowners’ improvement from being considered when assessing the property value for tax purposes. In other words, when a homeowner performs improvements to protect against flooding (i.e., raising the land), the assessed value of the home will not increase because of the improvement.

While these changes will surely reduce exposure due to losses, efforts continue to fix Florida’s property insurance issues brought on by rampant fraud and lawsuits. Rumor has it that Florida legislators may seriously consider abolishing the one-way attorney fee provision, a long overdue reform to remove the driving incentive of needless lawsuits.

As Floridians know best, if you want to see the sunshine, you have to weather the storm. So, perhaps a hopeful market for homeowners, carriers, and reinsurers awaits in the Sunshine State.

Tiffany Rothenberg is a partner at Kelley Kronenberg, a multi-practice business law firm with 12 locations in Florida and the United States. She focuses her practice on commercial first-party property litigation, representing commercial property insurance carriers in complex coverage disputes and bad-faith claims.


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