Two recent reports reflect trends in Florida’s property insurance market, including the continued growth of surplus lines’ business and an uptick last year in litigation costs for carriers.
The Florida Surplus Lines Service Office reported this week that the admitted market and surplus lines’ commercial books both grew in total written premium by more than 42% in 2023, continuing a steady rise in premium since 2018.
The admitted market carriers’ commercial property premium written jumped from $8.7 billion in 2022 to more than $12.5 billion last year, the FSLSO noted in its commercial property market white paper, posted July 15. The non-admitted market, made up mostly of surplus lines insurers, saw commercial premiums rise to almost $7 billion, up from $4.8 billion in 2022.
The FSLSO said the increases are the result of higher rates and premiums for policyholders, necessitated by inflation, including escalating labor and material costs.
“Despite these challenges, the market’s ability to expand underscores its resilience and adaptability in meeting the evolving needs of commercial property owners across the state,” the report said.
Surplus carriers’ commercial policy counts also rose, mirroring the overall growth for excess and surplus insurers in Florida in the last three years, as primary market insurers have raised rates and cut back on coverage in much of the state.
Looked at another way, the admitted market, while still increasing in total premium, continues to lose some market share to surplus lines. In 2018, the admitted market held 70% of the Florida property insurance market. But by 2023, that share had dropped to 64%, FSLSO noted. The surplus lines’ share has risen, from 30% in 2018 to 36% last year. The admitted market data does not include Florida’s largest property insurer, the state-backed Citizens Property Insurance Corp.
The greatest share of the surplus lines’ commercial business was for higher-end properties. Those paying $1,000 to $5,000 in premium make up almost 29% of the surplus lines’ commercial coverage business. Policies with more than $1 million in coverage saw a “dramatic surge” in 2023, with a 72% jump in policy count and a 33.5% rise in premium.
“Such sharp increases signal a rising demand for high-value insurance coverage to safeguard premium commercial assets,” the surplus lines office wrote.
The FSLSO report did not mention litigation as a cost factor. But the Florida Office of Insurance Regulation’s July report on property insurance stability noted that in 2023, Florida property insurers paid almost $3.5 billion in defense costs and containment expenses, which includes attorney fees.
That figure is up sharply from 2022. The DCC costs had fallen from a previous high of about $3 billion in 2021 to $2.9 billion for 2022, after Florida lawmakers ended costly assignments of benefits and one-way attorney fees in claims disputes.
The jump in litigation costs for 2023 likely is a one-year blip – the result of the tens of thousands of lawsuits that plaintiffs’ firms rushed to file before a major tort reform law took effect last summer. Other data indicate that claims litigation statewide is on the wane: Citizens officials reported last month that litigation rates for non-catastrophe claims has dropped from a high of 14% in 2020 to 6% in 2023.
The Florida OIR report, required twice a year by 2022 statute, shows that legal service of process filings have continued to drop since late 2021. While the LSOPs, which are tracked by the state Department of Financial Services, spiked a bit in 2023, the volume has diminished in 2024.
Services of process for assignment of benefits litigation also have dropped sharply since 2019, when lawmakers instituted early but limited AOB reforms. Notices of intent to litigate have fallen since a high of more than 8,000 in February 2023, OIR noted. Actual lawsuits on residential claims, measured with civil remedy notices filed, spiked in 2023, then fell, then jumped again early this year.
And a data set that has been quoted more than any other also shows improvement. The OIR has previously reported that in 2019, Florida accounted for 8% of homeowners claims in the United States, but 76% of the homeowners lawsuits filed. That statistic had been cited repeatedly by insurers, lobbyists, and lawmakers as the tell-tale snapshot that showed what was wrong with Florida’s litigation rules before reforms were enacted.
By 2022, that ratio had mellowed a bit: Florida claims had risen to 15% of the U.S. whole, and lawsuits had dropped to 71%, according to the OIR report, based on data from the National Association of Insurance Commissioners.
The OIR report can bee seen here. The FSLSO report is here.
Related: Florida Surplus Lines Saw ‘Monumental’ Growth in February
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