The future of Florida's property insurance marketplace looks bleak. A few weeks ago we wrote about FEMA ending their current subsidy program which is going to lead to a 5-10 x rate increase for Florida consumers living in flood areas (I'm talking to you South Tampa). Now comes news from the Florida Senate Banking and Insurance Committee that paints a dark picture of the future of property insurance in the state. According to the committee, most of the 52 insurers that control 80% of Florida's market are heading for lifer support as they are running out of money and have no means of raising new money since there is now little to no profit in the market. This leaves Citizens, the insurer of last resort, usually charging reduced rates for qualified homeowners, as the only insurer left in Florida for many. This is unsustainable but it also raises bigger questions regarding the future of Florida's housing market. If Florida homeowners can't afford property insurance or if they can't get any insurance coverage due to lack of insurers then how can they qualify for a mortgage? If Florida's consumers can't get mortgages due to lack of insurance that doesn't bode well for the future of home ownership for 1st time homebuyers and working and middle class Floridians. We have noticed a trend in the market where people just accept the force placed insurance imposed by mortgage lenders when homeowners can't find insurance. The rates on forced placed insurance are 5-10 times greater than non-force placed insurance, which means housing affordability is moving I the wrong direction for many consumer. This also means that investment companies like Zillow, Opendoor, and Offerpad will have an even greater advantage in buying all the good real estate throughout the state.
Why is property insurance such a difficult business model in Florida? I don't have all the answers but how can climate change be ignored here? Hurricanes, wind damages, flooding, are all major issues in Florida and now that these events are occurring more frequently and happening with more extreme intensity it appears that property insurance may soon be a thing of the past, with corporate landlords taking over large parts of the state and either self0insuring their homes or passing these exorbitant costs off to Florida's consumers. Florida is in desperate need of leadership at the state level that has the interest and know-how to actually solve these problems. Unfortunately, the current leadership is intent on doing nothing other than raising money for themselves while Florida heads down troubled a path.