Florida can’t rebuild insurance market without special interest show-down

Florida lawmakers seeking to resuscitate a homeowners insurance market at a pending special session will ultimately need to face off against a powerful special interest alliance leveraging one-way attorney fees and assignment of benefits,  AM Best said in a review of the pending political fight.

Florida's one-way attorney fee rule remains “the driving force behind the litigation crisis” in the state, AM Best analysts said in research ahead of the pending special session.

“This rule has been - and remains - a material incentive for disputing claims” that has avoided all indirect means of control as contractors and lawyers continually find “creative ways to skirt regulations.”

Florida’s one-way attorney fee statute is intended to protect policyholders against legal fees if they sue insurers over claims.

But contractors armed with assignment of benefit agreements and backed by an army of lawyers leverage the rule without risk of legal fees for losses.

AM Best seems to admit that the contractor-lawyer alliance constitutes quite a special interest group against which to face off. “The ultimate effectiveness of these reforms will depend on the response from such interested parties,” analysts wrote.  

The consequences are dire:  national carriers underweight Florida, leaving the market in the hands of Florida-focused specialists with weak balance sheets and an over-reliance on a volatile reinsurance market.

“The current market is keeping the major national homeowners writers from taking on exposures in Florida in line with their exposures in other states,” analysts write.

The top 5 homeowners writers with more than 50% in the other 49 states have only 15% of the Florida homeowners market.

The turn-around won't come quickly. National leaders are "unlikely to take such a step until necessary reforms have taken hold and once prevailing ates are sufficient to cover the risks they must bear."

The Florida-specialists, in turn, have begun to crumble under the pressure. Florida axed six such insurers in 2022 alone.

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