The Insurance Information Institute, a nonprofit organization funded by large insurers, estimated in 2023 that the average Florida homeowner insurance cost $6,000, three times the national average, to insure.
Hopefully that is about to change. Two longtime South Florida political leaders are pushing a congressional bill they say would immediately lower the cost of homeowner property insurance by about 25% in Florida and across the nation. How? By reducing the cost insurers must pay for re-insurance in case of a big claim after a storm. If that reduction were to happen, it would be welcoming news to millions of Florida homeowners suffering under backbreaking increases in property insurance costs over the past several years.
Steve Geller, a former Florida legislator and current Broward County commissioner, presented a plan he says would cut by half the amount of reinsurance that Florida-based insurance companies must purchase each year to ensure they can pay all claims in the event of a major storm.
Currently those companies are required by rating agency Demotech to purchase enough reinsurance to pay claims after a storm that has a 1-in-130-year chance of occurring. With that guarantee in place, insurers would only have to buy enough reinsurance to cover a 1-in-50-year event, rather than a 1-in-130-year event, Geller said at a news conference held Thursday to outline the proposal. In turn, that would reduce reinsurance costs by half and — because reinsurance costs make up half of insurance premiums — reduce costs of homeowner policies by 25%, Geller said.
But Jeff Brandes, former state senator and outspoken critic of the state’s insurance regulation, questioned Geller’s assumption that a 1-in-50-year storm is unlikely to occur as ocean temperatures increase each year. Brandes said the plan backed by Geller and Moskowitz amounts to “socializing the risk” and that Republicans in Congress are unlikely to back it, he said.
Geller admitted Thursday that the idea will be difficult to get through Congress. For one thing, it would be opposed by global reinsurance providers because they would make less money if small carriers were required to purchase less reinsurance, Geller said. Furthermore, several national insurers are in the reinsurance business as well. They would likely lobby to block any plan that erodes their revenue stream, he said.
As catastrophe models show the potential for costly weather damage increasing rather than decreasing every year, lawmakers and business interests seem wary of getting behind any plan that generates fewer dollars for insurance and recovery. Brandes said, “Politicians always underestimate the cost of insuring risk, while models say risk is increasing,” he said. “Ultimately it’s taxpayers who pay at the end.”
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