New State-Backed Carrier in Florida – Citizens Property Insurance
As private insurers fled, Florida’s state-backed Citizens Property Insurance Corporation became the safety net for hundreds of thousands of homeowners. Citizens, designed to be the “insurer of last resort,” now covers more than 1.2 million policies, making it one of the largest property insurers in the state. This concentration of risk in a single, government-backed entity creates systemic concerns.
Citizens operates differently from private insurers. It’s mandated to provide coverage regardless of risk level, and its rates are often subsidized to remain “affordable.” However, this model faces severe strain. Major hurricanes could potentially create assessments on all Florida property insurance policyholders, including those with private coverage, to cover Citizens’ losses.
Recent developments offer some hope. Governor Ron DeSantis announced rate decreases for Citizens policies in Miami-Dade County, and the company has begun efforts to “depopulate” by encouraging policyholders to move to private insurers. However, these transfers only work when private companies are willing and able to take on the risk.
Market Stabilization: Signs of Recovery
Despite ongoing challenges, several indicators suggest Florida’s insurance market may be stabilizing. Legislative reforms passed in recent years have addressed some of the factors that drove insurers away, particularly around lawsuit abuse and claims litigation. These changes appear to be having an effect, with 17 companies filing for rate decreases since January 2024.
The influx of new insurers also brings innovation to the market. Many newer companies utilize advanced weather modeling, satellite imagery, and artificial intelligence to better assess and price risk. Some focus on risk mitigation, offering discounts for hurricane shutters, impact-resistant roofing, and elevated construction. This approach could help make coastal properties more insurable over the long term.
Additionally, some previously departed insurers are cautiously returning. Heritage Insurance resumed writing new policies in August 2024 after a hiatus, suggesting that market conditions may be improving for well-positioned companies.
The National Ripple Effect
Florida’s insurance crisis serves as a harbinger for other states facing increasing climate risks. Louisiana, Texas, North Carolina, and South Carolina all show signs of similar market stress. California’s wildfire-prone regions face comparable challenges with insurer departures and rising premiums.
This geographic concentration of risk creates national implications. As insurers retreat from high-risk areas, the remaining companies must spread their risk across smaller geographic areas or raise rates to compensate for increased exposure. Federal intervention through programs like the National Flood Insurance Program provides some backstop, but these programs have their own financial challenges.