Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Economy

Why Insurance Companies Are Fleeing Florida

It’s not just the hurricanes.

A house destroyed by a hurricane.
Heatmap Illustration/Getty Images

The Florida insurance market took another hit this week when Farmers announced it would pull out of the state, leaving around 100,000 customers unable to renew their policies.

While the news garnered headlines, it was exceptional not so much for Farmers pulling out, but for how long the insurance giant had stayed in the Florida market. Other national carriers had long since left and remaining Florida-specific carriers have been suffering under the weight of the state’s dangerous weather and uniquely lawsuit friendly legal environment.

At the same time that Farmers announced its departure, records were being set for ocean temperature in Florida, crossing 90 degrees in the waters off the southern part of the state. And the state may be in for nasty storms later this year. Forecasters at Colorado State University last week projected an “above-average” Atlantic hurricane season .

Farmers’ departure from Florida is also just the latest example of a major national carrier leaving a large, disaster-prone state. Allstate and State Farm said earlier this year they were leaving the California property market.

Farmers “looked at their book and determined they needed to reduce their catastrophe exposure. Most national carriers made that decision a long time ago,” RJ Lehmann, editor-in-chief and senior fellow at the International Center for Law and Economics, told me.

Customers with Farmers-branded home, auto, or umbrella insurance will not be able to renew their policy as their terms expires. The changes will not begin to take effect for 90 days.

“This business decision was necessary to effectively manage risk exposure,” Farmers spokesperson Trevor Chapman said in a statement. The company will continue to offer insurance through other brands it owns, Bristol West and Foremost.

The future of Florida’s insurance industry could be a harbinger for the rest of the country as it deals with extreme weather exacerbated by rising temperatures. Florida is a tough insurance market for the obvious reasons — property damage caused by wind, rain, and flooding from tropical storms (not to mention wildfires and tornadoes) — as well as its unique (although changing) legal environment.

While more and more of Florida’s insurance business is being taken on by the state-run Citizens Property Insurance Corporation, some followers of the state's economy are cautiously optimistic that insurers could eventually return to the state. But that return would likely be conditioned on a market and legal environment far more friendly to insurance companies, one with high premium and reduced rights for policyholders. After all, Florida’s high insurance rates have hardly stopped people from moving in, but the combination of extreme weather and high homeowner insurance rates could put the Florida dream of home ownership in America’s tropical climate out of reach for many.

The legal environment is changing thanks to reforms of Florida’s uniquely insurance company-unfriendly litigation system that have been signed by Governor Ron DeSantis over the past few years. This included eliminating Florida’s distinctive “one-way” attorney fees set-up, whereby if a policyholder won any amount of money from an insurer, the insurance company would pay attorneys fees for both sides. This system was obviously disliked by insurance companies, who argued that it led to the flowering of a Florida-specific cottage industry for trial attorneys; while those attorneys argued it gave policyholders a shot in prevailing against well-funded insurance companies.

Another bill banned the practice of letting policyholders “assign” the right to pursue a claim — and sue insurers — to contractors, another practice blamed by the industry for increased litigation.

Florida had over 75 percent of homeowners’ lawsuits in the country as a whole, despite only having 7 percent of the homeowners’ insurance claims, according to data from the Florida Office of Insurance Regulation.

Jeff Brandes, a former Republican state legislator who has long advocated to litigation reforms, predicted that the legislation, which was passed in April, will take somewhere between 18 and 24 months to have an effect on the market.

“I fully expect three-five companies to pull out and rates to go up 10 to 15 percent next year,” Brandes said, although he noted that he expected rates to stabilize in 2025.

In February, the St. Petersburg-based United Property & Casualty Insurance Company was deemed insolvent by state regulators. Some 15 insurers became insolvent between 2020 and the end of 2022.

Since 2016, Florida property insurance companies have been losing money on their underwriting — premiums collected minus claims paid — and only in the first quarter of this year did the industry as a whole turn a net profit, and that was thanks to investment earnings; underwriting profit was still negative.

Even if insurers return to the state, that doesn’t mean that said insurance will necessarily be attractive to homeowners: Part of why a less litigation-friendly market may be tempting to insurers is the very high rates that Florida policyholders pay for home insurance.

Average premiums in the state range from $1,651 in Sumter County in Central Florida to as high as $5,665 in Miami-Dade or $5,710 in Palm Beach, according to the Florida Office of Insurance Regulation. The nationwide average is around $1,900.

“We’re getting to a place where the availability problem will get better,” Lehmann said. “The affordability problem? We live on a low-lying peninsula with some of the most hurricane prone waters in the world.”

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Politics

AM Briefing: The Vote-a-Rama Drags On

On sparring in the Senate, NEPA rules, and taxing first-class flyers

The Megabill’s Clean Energy Holdouts
Heatmap Illustration/Getty Images

Current conditions: A hurricane warning is in effect for Mexico as the Category 1 storm Flossie approaches • More than 50,000 people have been forced to flee wildfires raging in Turkey • Heavy rain caused flash floods and landslides near a mountain resort in northern Italy during peak tourist season.

THE TOP FIVE

1. Senate Republicans spar over megabill’s clean energy policies

Senate lawmakers’ vote-a-rama on the GOP tax and budget megabill dragged into Monday night and continues Tuesday. Republicans only have three votes to lose if they want to get the bill through the chamber and send it to the House. Already Senators Thom Tillis and Rand Paul are expected to vote against it, and there are a few more holdouts for whom clean energy appears to be one sticking point. Senator Lisa Murkowski of Alaska, for example, has put forward an amendment (together with Iowa Senators Joni Ernst and Chuck Grassley) that would eliminate the new renewables excise tax, and phase out tax credits for solar and wind gradually (by 2028) rather than immediately, as proposed in the original bill. “I don’t want us to backslide on the clean energy credits,” Murkowski told reporters Monday. E&E News reported that the amendment could be considered on a simple majority threshold. (As an aside: If you’re wondering why wind and solar need tax credits if they’re so cheap, as clean energy advocates often emphasize, Heatmap’s Emily Pontecorvo has a nice explainer worth reading.)

Keep reading...Show less
Yellow
Climate Tech

Lyten Is Acquiring Northvolt’s Energy Storage Manufacturing ​Plant

It’s the largest facility of its kind of Europe and will immediately make the lithium-sulfur battery startup a major player.

A Lyten battery in Poland.
Heatmap Illustration/Getty Images, Lyten

Lyten, the domestic lithium-sulfur battery company, has officially expanded into the European market, announcing that it has acquired yet another shuttered Northvolt facility. Located in Gdansk, Poland, this acquisition represents a new direction for the company: Rather than producing battery cells — as Lyten’s other U.S.-based facilities will do — this 270,000 square foot plant is designed to produce complete battery energy storage systems for the grid. Currently, it’s the largest energy storage manufacturing facility in Europe, with enough equipment to ramp up to 6 gigawatt-hours of capacity. This gives Lyten the ability to become — practically immediately — a major player in energy storage.

“We were very convinced that we needed to be able to build our own battery energy storage systems, so the full system with electronics and switch gear and safety systems and everything for our batteries to go into,” Keith Norman, Lyten’s chief sustainability and marketing officer, told me. “So this opportunity became very, very well aligned with our strategy.”

Keep reading...Show less
Blue
Energy

If Wind and Solar Are So Cheap, Why Do They Need Tax Credits?

Removing the subsidies would be bad enough, but the chaos it would cause in the market is way worse.

Money and clean energy.
Heatmap Illustration/Getty Images

In their efforts to persuade Republicans in Congress not to throw wind and solar off a tax credit cliff, clean energy advocates have sometimes made what would appear to be a counterproductive argument: They’ve emphasized that renewables are cheap and easily obtainable.

Take this statement published by Advanced Energy United over the weekend: “By effectively removing tax credits for some of the most affordable and easy-to-build energy resources, Congress is all but guaranteeing that consumers will be burdened with paying more for a less reliable electric grid.”

Keep reading...Show less
Green