Why has the condominium Insurance Rate Skyrocketed?
What was already a difficult insurance market has been flipped on its head by Hurricane Ian. Historically Insurance costs have stabilized about 4 years after a storm, this is what happened after Charlie and Wilma then we had many years with no significant hurricanes and a capital market chasing returns causing re-insurance rates to be very competitive and subsequently insurance to be competitive until Irma and then Michael the very next year.
Following the significant losses of these two storms and the ‘feeding at the insurance trough’ of marginal if not fraudulent claims (see statistics below) many insurance companies took severe losses with multiple going out of business, while it wasn’t immediately apparent in the first year after the storm by the close of ‘claim window’ 3 years post Irma it had become one of the costliest storms to date. Re-insurers also had losses in Texas from Harvey and the Caribbean from Maria, Losses for the 4 storms were over $100billion.
By law the association is required to do an insurance appraisal at least every 3 years and our last appraisal was in 2019 with an insurable replacement value of $43.5 million, our new appraisal for 2022 is $60 million a 38% increase in value – this is actually less than the increase in sales prices over the last 3 years but certainly reflects the rise in construction costs. Insurance is of course priced per the ‘replacement value’ so for 2023 the increase is not only in 'base rate' but also on increased replacement cost a double whammy so to speak.
While we saw ‘stable’ increases from 2018 to 2021 as most of you are aware we were canceled by our long time insurer last year and the replacement property insurance policy went from $200,582 to $353,471, in 2018 the association insurance policy was $134,957, from 2018 to 2022 the association saw an increase of $218,514 or $827.70 per unit per year. This pales in comparison to our most resent renewal with premium rising from $353,471 to $970,925 a 174% increase and a 619% increase from rates in 2018.
If our 'base rate' (price per $100 of coverage) had remained stagnant and insurance increase was solely on the basis of increased value our policy would have been $487,790. Our base rate increased 99% over 2022.
While there was little the board could do in anticipating this exorbitant increase in insurance it was made worse and at the last minute by Hurricane Ian, some insurers even pulled quotes from other communities and repriced them.
The association board is exploring any and all means of replacing this policy, however there is a ‘minimum earned policy’ amount of 35% which means that no matter if something can be done there will be no changes until April 15th. The renewal insurance is been underwritten by a ‘consortium’ and by multiple carriers, at different layers of coverage, these are the only carriers willing to insure our community due to the age of our roofs and the value of the property being insured. It took a total of 18 different insurance companies to cover the $60million in value, that is how difficult it was to actually secure replacement insurance, and final coverage was not received until the last day of the expiring policy. The few ‘regular’ carriers left in the state would not insure us because of our roof age and/or they couldn’t write a policy for $60million.
The state ‘insurer of last resort’ Citizens provided a ‘preliminary’ quote however there was no way to bind this policy in time, they are completely inundated with requests due to the fact so many homeowners are being cancelled by their insurance company. We will work with our insurance agent to look to get a policy replacement beginning April 15 with a potential savings of $300k over the current policy.
100% insurance coverage is required both by Florida Statute and our condominium documents as well as every lender who has a mortgage in the community – there was no option of not renewing or not renewing at full coverage - not that it would have been an acceptable risk regardless. For reference those owners with mortgages would have had force-place insurance by their lenders at an amount far exceeding even this ridiculously exorbitant renewal policy.
The long term plan to bring insurance to a ‘normal’ level (whatever the new normal shall be) is to replace the roofs so that the community will satisfy the risk criteria for the 2 ‘regular’ insurance carriers currently writing policies at this value. While nothing is guaranteed and the insurance market is constantly changing as a reference our insurance agents secured coverage for a similar property to ours with new ‘Irma’ roofs at a rate that would have been similar to our current expiring policy.
Below are some snippets from articles & blogs as well as links to news stories about the insurance marketplace in Florida
Home Insurance Rates Are Skyrocketing in Florida. Here’s Why.
Despite legislative reforms passed during the 2021 Legislative Session, Florida’s homeowners have continued to see dramatic property insurance rate increases. At the same time, the insurance industry is losing billions to unnecessary lawsuits from third-party contractors. In the first three quarters of 2021, financial results show that property insurance had $1.22 billion in underwriting losses.1
So, what does this have to do with your property insurance rates going up? Everything.
Florida’s insurance marketplace has been plagued by unscrupulous cottage industries whose business model is capitalizing on consumers’ insurance policies. Bad actors in the construction, roofing, public adjusting, and legal industries have used abusive solicitation and marking tactics to manipulate the claims process for their benefit.
Only 8.15% of all U.S. homeowners claims were opened in Florida in 2019. Yet, Florida accounted for more than 76 percent of property claim lawsuits in the U.S.
Between 2013 and 2020, Florida’s property insurers paid out fifteen billion in claims costs. Only eight percent of that was paid to consumers, while 71% was paid to attorneys.