By Michelle Conlin and Matt Tracy
NEW YORK/WASHINGTON (Reuters) – Jim Tynan had a homeowners policy with Allstate for 32 years on his 1,200-square-foot apartment in Ponte Vedra, Florida.
In January, Tynan’s subsidiary Allstate told him it was dropping him. Tynan called 10 different agencies, “and none would cover me,” he said.
Finally he found one that would. It cost 50% more.
Florida has been hit by four major hurricanes in the past four years, causing insurance premiums to skyrocket and some insurers to withdraw coverage. For residents cleaning up after storms or living near water, they have another concern: Will they still have insurance?
Tynan said he was not directly hit by a hurricane, but he is two miles from the ocean.
“I’m afraid I’m going to get a letter from my new company saying they’re going to drop me too,” Tynan said after the latest hurricane. “It’s very scary.”
Six other homeowners contacted by Reuters in areas including Florida’s coast and the Keys also said they were concerned that back-to-back hurricanes would result in more price increases and foreclosures. Worse still, they feared they would lose their insurance altogether.
Allstate said it was working with regulators to protect as many customers as possible. For those it can’t cover, “We are working with other carriers to provide alternative coverage offerings.”
A number of homeowners in Florida have faced a precarious situation when purchasing insurance. Average homeowner premiums in Florida increased nearly 60% from 2019 to 2023. Some major insurers have reduced coverage. The state insurer Citizens has now taken on more activities.
Analysts and insurance experts predict more nervousness among insurers following Hurricane Milton, which made landfall on Florida’s southwest coast just 12 days after Hurricane Helene made landfall on Florida’s northwest coast.
“This will certainly cause insurers to become concerned about continuing to insure in the marketplace,” said Marc Ragin, associate professor of risk management and insurance at the University of Georgia’s Terry College of Business.
The increased hurricanes could increase dependence on the state-backed nonprofit insurer Citizens, which is considered the insurer of last resort.
Florida Governor Ron DeSantis has raised questions in the past about how the insurer would be able to pay claims if major storms hit. Citizen spokesman Michael Peltier said it would always be able to pay because it was structured to levy surcharges on policyholders first and then, if necessary, assessments on non-policyholders. He said about 80,000 claims had been received in relation to Milton to date and the company expected to be able to pay them all without having to levy assessments on non-citizen policyholders.
DeSantis’ office said Wednesday that while citizens will always have the ability to pay claims, “this will come at the expense of all Florida policyholders.”
Citizens had more than 1.2 million policies in force as of June, compared to approximately 1.14 million policies at the end of 2022, according to data from the Florida Office of Insurance Regulation (FLOIR).
“We could see a scenario where Citizens have to take on a lot of policy again,” said Chai Gohil, global insurance analyst at investment management firm Neuberger Berman.
INSURANCE CONCERNS
The storms, which came in close succession, increased concerns about higher prices.
“I think the hope for a softer market just disappeared after Helene and Milton,” Ken Gregg, founder and CEO of Orion180, told Reuters in a written statement. Gregg added that Milton would have an impact on the reinsurance market for next season “in terms of capacity and pricing.”
Brian Schneider, senior director of insurance at Fitch Ratings, said price increases by reinsurers “are pushing many of the primary insurance companies, especially on the commercial side, to have to increase their prices for the real estate sector.”
The insurance market in Florida consists of a mix of large established players, new entrants and citizens.
In addition, a number of insurers, including Orion180 Insurance, are taking over existing policies from Citizens in a ‘Depopulation Program’ to transfer policyholders to private insurers. Citizen spokesman Michael Peltier said it wants to reduce its current policy to less than one million by the end of 2024.
Despite the massive storms, a number of private insurers said they remained committed to the market.
The largest include State Farm Florida Insurance and Universal Property & Casualty Insurance, according to the Florida Office of Insurance Regulation (FLOIR).
“State Farm plans to continue our presence in the Florida insurance market,” a company spokesperson told Reuters.
Arash Soleimani, chief strategy officer of Universal Property & Casualty Insurance, said the company is “resolutely committed” to Florida. “Nothing that has happened this year is outside of our modeled expectations.”
Security First Insurance, a Florida-focused insurer, also said it remains committed to the market.
“Another hurricane like Milton for Security First would be an earnings event, not a capital event,” CEO Locke Burt told Reuters.
Of those who withdrew, many retain some exposure.
Progressive began reducing exposure in mid-2022 to focus on states with less catastrophe exposure, although a Progressive spokesperson said it continues to conduct real estate operations in the state.
In 2023, Farmers Insurance discontinued its own brand coverage in the state. A Farmers spokesperson said it will continue to serve customers through its Bristol West and Foremost brands.
Travelers has avoided underwriting in Florida because of the weather-related risk there, Michael Klein, president of Travelers private insurance, said during an earnings call in April. The company did not respond to a request for comment.
“I think that while Milton and Helene are testing the state of Florida, major insurers are in a great position to pay out claims,” said Michael Carlson, president and CEO of the Personal Insurance Federation of Florida, which represents major insurers in the state and does not see any major players leaving.
For homeowners, however, concerns are increasing.
“The reality is that we may be forced to leave the home we have lived in for 35 years,” said Sherri Hansen, who lives in the Florida Keys. “All our eggs are in this one basket.”
(Reporting by Matt Tracy in Washington and Michelle Conlin in New York; Editing by Megan Davies and David Gregorio)
