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The structural failure of a condo building in Surfside, Florida, will continue to haunt the insurance market in 2023. The 2021 tragedy ushered in new Florida legislation and stricter underwriting requirements for condominium insurance policies. As a result, unit owners across Florida face higher insurance premiums and many unexpected assessments necessary to remediate issues found during inspections.
The pricing increases and reduced capacity have raised the temperature in association board meetings. Angry residents, upset with their elected board members and insurance agents, are demanding relief. Despite a desire by each board and their respective insurance broker or agent to deliver better news, there’s little relief in sight.
Here’s the lowdown on the condo insurance issues facing Florida for 2023:
In general, a hard market means higher rates and a more limited selection of insurance carriers available to policyholders in the insurance marketplace. Though signs of hardening began in 2019, recent major loss events such as Hurricane Ian have exacerbated the tight market.
The Florida condominium insurance market has seen some other drastic changes in the wake of the Surfside collapse. Before the Surfside catastrophe, many insurers did not ask agents to provide the 40-, 50- or 60-year re-certifications.
Today, insurance companies will decline to quote if a client does not meet strict underwriting guidelines related to recertification or the association is in the middle of ongoing projects. Carriers often are specifying required timelines for remediation projects to be completed as a condition of coverage.
Many key condo carriers exited Florida and no longer write any risks in the state. The industry estimates certain insurers paid well over $1 billion in claims as a result of Surfside, including attorneys’ fees.
Older condos are suffering most from the market hardening. Remaining carriers will only entertain what they consider “good risks.” A 2010 building is likely to fare better in the underwriting process than a structure built in 1975, for instance.
Immediately after catastrophic events in Florida, public adjusters and attorneys had been swarming the area, driving up claim demand (sometimes completely outside the scope of actual damages). As a result, beleaguered insurance companies, already stretched thin during disasters, had the additional challenge of fighting inflated claims.
This litigation has increased the cost and reduced capacity in the Florida market, negatively affecting many policyholders. Carriers that underwrite condominiums in Florida were forced to greatly increase rates to stay financially viable.
Florida Senate Bill 2A, passed in December 2022, addresses this litigation cost with the goal of stabilizing the Florida insurance market. Unfortunately, 2A will not provide short-term relief from high insurance prices, but we may start seeing some relief in the second half of 2023.
Reinsurance is “insurance” for insurance companies, and many insurers rely on it heavily. Reinsurance companies serve insurance providers globally, which allows them to spread their risk. However, catastrophic events are increasing in frequency and severity across the world. Hurricanes, wildfires, tornadoes, floods, snow and ice events, riots, and civil commotions are becoming commonplace.
The reinsurance market cannot continue to sustain these heavy losses, and some reinsurers are choosing to exit the Florida market. In turn, insurance carriers that depend on reinsurance to limit their losses are also choosing to leave the Florida market (in lieu of remaining without any prospect of reinsurance). Florida Senate Bill 2A partially addresses this reinsurance problem, but capacity is likely to remain an issue for the first half of 2023 and possibly longer.
We understand the heavy responsibility that condominium board members face when making decisions and taking actions on behalf of their association.
The Condominium specialists at Risk Strategies can help you navigate the complex, hardened Florida insurance market. We’ve dug deep into evolving state regulations, and our carrier partnerships can assist in guiding you to the right coverages.