Florida Homeowners Insurance
May. 28th, 2022 08:18 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
walkitoutFor the last 6 years, and probably soon for the 7th year, very expensive wind damage has occurred during Hurricane Season in Florida. Back during the W. administrations, there was some talk of how Florida was going to really struggle with climate change. After that, the Republican Party dug in on climate change denialism. Some national insurance companies quit selling insurance in Florida, however, others came in, notably, hedge funds who were happy to charge high premiums to bet that this year was not the year that claims would exceed premiums.
Time has passed, and more people have moved to Florida. While there was a stretch post Katrina without major storm damage, at 6 years in a row, things have evolved. Insurance companies have dug in, refused to pay claims, or minimized payment on claims. In return, homeowners have assigned the right to sue to contractors, who then collected from the insurance company and replaced the roof. While there have been some attempts to improve the ability of roofs in Florida to endure very high winds, the Republican Party has responded by deciding to sunset parts of the code that no one stepped up to justify, and to refuse to adopt national code updates.
As a result, more insurance companies have struggled to buy reinsurance, and have quit covering homes in Florida, or only cover some homes in Florida, and home insurance premiums have gone even higher.
It is tempting to see this as like Earthquake coverage, which similarly spiked on the west coast in the 1990s, and which many people on the West Coast still do not carry as the separate insurance that they would have to have to be protected against earthquake damage. By separating out a peril, the multi-peril basket went back to being affordable, and the ability of homeowners to continue to own their home and keep paying their mortgage and not be foreclosed upon was sustained.
However, while a big one could occur at any time on the west coast, every _year_ big storms keep piling up. There isn’t a reliable forecast of steady state more / worse earthquakes; there is a reliable forecast of more / worse wind damage.
The Florida legislature recently had a special session to try to fix this problem. The Democratic Party, in the minority, was trying to get premium relief for homeowners. The Republican Party was trying to keep insurers from leaving the state while also not in any way signing on to fixing the building code or acknowledging the reality of climate change or asking for any help from outside the state. The result were some changes to how lawsuits involving homeowners insurance coverage work, that may or may not be constitutional.
If, in fact, the ability of insurance companies to stay in business in Florida was primarily impacted by scammy contractors faking up the need for new roofs, then this will fix it. However, that doesn’t seem especially likely, and the lawmakers acknowledge that nothing about what they just passed will provide monetary relief from the now extremely high premiums being charged.
Most single family homes in Florida have asphalt shingles, much like most of the rest of the country. When wind passes over this kind of roof, it creates “uplift” pressure under the sheathing. The code changes have involved changes to the kind of nails and spacing of nails to try to resist that uplift pressure. There are people trying to innovate roofs that would not suffer from this kind of reaction to uplift pressure. There doesn’t seem to be any interest on the part of either existing insurers in Florida or the government in Florida to look into or encourage the adoption of innovation that would reduce the amount of property damage that results from high winds affecting roofing in Florida.
Florida does run a property insurer itself (Citizens) and many who have lost their coverage have turned to this option, but this insurer also has requirements that mean coverage is not automatic. This insurer has also requested an 11% rate hike, and it is broadly understood that a normal-to-slightly-worst-than-normal hurricane season risks making the state of Florida insolvent as a result.
Another option would be to request from the United States Government an extension to “Flood” insurance, that would be coverage for “Wind” in areas that it has become impossible for the private insurance market to offer coverage.
Mortgages generally require homeowners insurance to cover multiple perils. Even without a single drop of rain falling or more than a breeze blowing, if enough homeowners are unable to buy coverage at any price, or at a price that they can afford, the resulting collapse in mortgages could easily pass through to the national economy via pathways involving mortgage securitization that we presumably have not already forgotten about.
There’s a lot going on right now. I know no one cares about what’s going on with homeowners insurance in Florida. Even most people in Florida don’t care about what’s going on with homeowners insurance in Florida. But someone probably ought to be putting together a plan for what to do in the event of a somewhat bad, but not emergency declaration bad hurricane season in Florida. Without an emergency declaration, it will be tricky to figure out how to handle the insolvency of Citizens, the state of Florida, and the bankruptcy of multiple insurers, resulting in the failure to broadly pay claims to enable homeowners to recover from a basically ordinary storm season.
Time has passed, and more people have moved to Florida. While there was a stretch post Katrina without major storm damage, at 6 years in a row, things have evolved. Insurance companies have dug in, refused to pay claims, or minimized payment on claims. In return, homeowners have assigned the right to sue to contractors, who then collected from the insurance company and replaced the roof. While there have been some attempts to improve the ability of roofs in Florida to endure very high winds, the Republican Party has responded by deciding to sunset parts of the code that no one stepped up to justify, and to refuse to adopt national code updates.
As a result, more insurance companies have struggled to buy reinsurance, and have quit covering homes in Florida, or only cover some homes in Florida, and home insurance premiums have gone even higher.
It is tempting to see this as like Earthquake coverage, which similarly spiked on the west coast in the 1990s, and which many people on the West Coast still do not carry as the separate insurance that they would have to have to be protected against earthquake damage. By separating out a peril, the multi-peril basket went back to being affordable, and the ability of homeowners to continue to own their home and keep paying their mortgage and not be foreclosed upon was sustained.
However, while a big one could occur at any time on the west coast, every _year_ big storms keep piling up. There isn’t a reliable forecast of steady state more / worse earthquakes; there is a reliable forecast of more / worse wind damage.
The Florida legislature recently had a special session to try to fix this problem. The Democratic Party, in the minority, was trying to get premium relief for homeowners. The Republican Party was trying to keep insurers from leaving the state while also not in any way signing on to fixing the building code or acknowledging the reality of climate change or asking for any help from outside the state. The result were some changes to how lawsuits involving homeowners insurance coverage work, that may or may not be constitutional.
If, in fact, the ability of insurance companies to stay in business in Florida was primarily impacted by scammy contractors faking up the need for new roofs, then this will fix it. However, that doesn’t seem especially likely, and the lawmakers acknowledge that nothing about what they just passed will provide monetary relief from the now extremely high premiums being charged.
Most single family homes in Florida have asphalt shingles, much like most of the rest of the country. When wind passes over this kind of roof, it creates “uplift” pressure under the sheathing. The code changes have involved changes to the kind of nails and spacing of nails to try to resist that uplift pressure. There are people trying to innovate roofs that would not suffer from this kind of reaction to uplift pressure. There doesn’t seem to be any interest on the part of either existing insurers in Florida or the government in Florida to look into or encourage the adoption of innovation that would reduce the amount of property damage that results from high winds affecting roofing in Florida.
Florida does run a property insurer itself (Citizens) and many who have lost their coverage have turned to this option, but this insurer also has requirements that mean coverage is not automatic. This insurer has also requested an 11% rate hike, and it is broadly understood that a normal-to-slightly-worst-than-normal hurricane season risks making the state of Florida insolvent as a result.
Another option would be to request from the United States Government an extension to “Flood” insurance, that would be coverage for “Wind” in areas that it has become impossible for the private insurance market to offer coverage.
Mortgages generally require homeowners insurance to cover multiple perils. Even without a single drop of rain falling or more than a breeze blowing, if enough homeowners are unable to buy coverage at any price, or at a price that they can afford, the resulting collapse in mortgages could easily pass through to the national economy via pathways involving mortgage securitization that we presumably have not already forgotten about.
There’s a lot going on right now. I know no one cares about what’s going on with homeowners insurance in Florida. Even most people in Florida don’t care about what’s going on with homeowners insurance in Florida. But someone probably ought to be putting together a plan for what to do in the event of a somewhat bad, but not emergency declaration bad hurricane season in Florida. Without an emergency declaration, it will be tricky to figure out how to handle the insolvency of Citizens, the state of Florida, and the bankruptcy of multiple insurers, resulting in the failure to broadly pay claims to enable homeowners to recover from a basically ordinary storm season.