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Florida property insurance legislation “inadequate”, says Demotech’s Petrelli


In an exclusive interview with Artemis, Joseph Petrelli, President and Co-Founder of rating agency and consultant Demotech, Inc. explained that the special session reforms passed by the Florida legislature last week are “inadequate”, when measured against what the state really needs to fix its property insurance marketplace.

Petrelli told us recently that, Florida’s insurance carriers face one problem above all others, the fact that they are over-litigated and being badly affected by a litigious property insurance claims environment where fraud has been de rigueur.

Now, after the Florida Senate and House floors passed a package of reforms in record time during the special session and the resulting Bill, SB 2B was signed into law by the state’s Governor last week, Petrelli exclusively told us that this doesn’t go far enough.

Recall, Petrelli’s firm Demotech is the rating agency for the majority of the Florida primary property insurance marketplace and assess their financial strength and reinsurance program adequacy just prior to the wind-season getting underway.

As a result, Demotech has been watching this closely as before the legislation was set, the rating agency was anticipating numerous insurance carriers struggling to retain their ratings this year, as poor performance in recent history and a struggle to secure adequate reinsurance was going to affect their financial assessments.

Now, the new legislation may have some positive effects for some carriers, but it far from the package of reforms Petrelli had been hoping Florida’s lawmakers would put together in the last week.

“When evaluating the legislation that was passed during Florida’s special session on property insurance, its favorable reviews are based upon comparison to current legislation and statutes.

“As the current legislation and statutes created, facilitated or otherwise sustained Florida’s litigation and claim frequency crisis, Demotech believes that the necessary comparison is a comparison of the legislation emerging from the special session to the legislation needed to resolve the litigation and claim frequency crisis and return Florida’s residential property insurance marketplace to a position consistent with the national composite,” Petrelli explained.

On which basis he added, “When measured against our more rational standard, the legislation that emerged is inadequate.”

Petrelli’s view is also held by many of our reinsurance market contacts, who lack confidence that the special session reforms will make a significant impact very quickly, with many feeling they will need to be followed up by additional packages of reforms.

But with Florida’s next Senate session due in May 2023, just before the key renewals again, it might be challenging for the market to wait that long, with uncertainty lingering over it and no clear signs of the reforms taking effect being felt.

It feels like the lawmakers need to consider doing more and relatively quickly as well, to satisfy those that keep the Florida property insurance market functioning, to a degree, constituents like Demotech, global reinsurance firms and the capital markets, for all of whom it seems confidence in Florida’s insurance market is sorely dented.

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