Commercial property policyholders in Florida brace for even higher premiums

Policyholders with first quarter renewals are seeing significantly higher rates compared with the year prior.

“In this calendar year specifically, the increases are at 30%-50% on average, and also difficult for larger projects to even get the capacity, meaning enough insurance limits to cover the building or project,” said Jim McCue, COO of NSI Insurance Group. (Credit: MarekPhotoDesign.com/Adobe Stock)

As a result of Hurricane Ian, as well as a number of Florida insurers going bankrupt or leaving the state, there’s significant concern among commercial property owners that insurance rates will continue to rise.

According to Marko Cerenko of Kluger, Kaplan, Silverman, Katzen & Levine in Miami, there’s also a fear that there will be a decrease in the number of insurance options as insurers continue to leave the state. The exodus of insurers and increasing premiums are largely blamed on fraudulent claims and the threat of weather-related damage.

“One thing that’s already apparent, at least as to those whose renewals have come up in the first month-and-a-half of Q1, is that the insurance rates are already up significantly higher than last year,” said Cerenko.

As he sees it, one of the biggest issues is the need for reinsurance available in the state, which prevents insurance companies from writing new businesses and setting off their risk.

“The hurricane really made that worse. That is a significant, significant concern,” Cerenko said.

Another reason why the property insurance market is so volatile, he said: As more people migrate to South Florida, it drives up costs.

“These ancillary service providers and industries are increasing their costs, which get funneled down to the consumer,” said Cerenko. “If you make a claim, then that becomes a more expensive claim to you, which you try to pass on to the insurance company, and the way they mitigate that is by raising rates. It’s a vicious cycle of what’s going on.”

Cerenko says there is a current discussion in the legislature to stop that cycle, and also put a cap on what lawyers can and can’t do, and whether they can recover fees. In 2022, Gov. DeSantis signed property insurance legislation creating a $2 billion fund to help insurers pay potential hurricane damages and change rules on coverage denials and attorneys fees.

“The legal environment in Florida as well as the ancillary industries, that in itself have made the insurance companies increase their rates,” he said.

A waterfall of claims against insurance companies have come due to last year’s hurricane, Cerenko says, which has opened the floodgates with complaints and litigation. It’s important for attorneys to do their due diligence in these cases, he says.

“Make sure that there’s coverage for the claims you’re making. Review any and all policies and get the proper evidence in terms of the damages that are claimed by the insurers. Don’t necessarily go by what the insurer says,” said Cerenko.

The current state of the insurance market is the most challenging that Jim McCue, COO of NSI Insurance Group in Miami Lakes, has seen in his career.

“In this calendar year specifically, the increases are at 30-50% on average, and also difficult for larger projects to even get the capacity, meaning enough insurance limits to cover the building or project,” said McCue. “That creates a trickle-down effect for the developer or owner of the property because from there you have to deal with lenders.”

For McCue, one of the biggest challenges is the high prices and limited capacity in South Florida’s coastal areas.

“Statistically, over the last six years, there have been 10 events that have hit the insurance markets that have been more than $10 billion in insured losses,” said McCue. “They’re having to reduce the amount of reinsurance they’re offering to insurance companies, and they’re asking for more money for that.”

McCue doesn’t see a solution to the problem in the short term, especially if there’s another hurricane in the near future.

“The next six months, there’s not going to be any change to what we see now. Pricing is expensive. For old buildings that are not maintained, you’re seeing pricing out of control and even doubling sometimes. Increases of 50% or more are not unusual to see,” said McCue. “In the longer term, if we don’t have a storm, you’ll start to see some equilibrium of pricing. You’re not going to see reductions. I’d be stunned if, within the next 12 months, you see a reduction in insurance costs. I don’t see it happening.”

A lack of new roofs and plumbing updates are the top issues McCue and Cerenko see that can prevent a property owner from getting the insurance they need. Factors that can improve a property owner’s chances of lowering their rates include having a well-built building, an updated roof, an elevated building to help prevent flooding, and no prior losses or claims.

“All those factors will play into [how] an insurance company sets the rates,” said Cerenko. “If you have a commercial building, and the roof is 20 years old as opposed to putting in a brand new roof, you could see a significant increase in rates.”

To the rescue?

Although insurers are leaving the state, one insurtech company has acquired the exclusive renewal rights for over 91,400 Florida homeowners insurance policies from UPC Insurance, a property and casualty insurance company headquartered in Florida. Tampa-based Slide Insurance is the first Florida insurer to open for new business in 2023.

Fred E. Karlinsky, shareholder and global co-chair of Greenberg Traurig’s Insurance Regulatory and Transactions Practice Group, represented Slide. His team which consisted of Timothy Stanfield and Christian Brito, also of Greenberg Traurig, assisted in the acquisition.

“Slide Insurance is an innovative insurer that emphasizes underwriting technology and risk analysis as it takes on more policies in Florida,” said Karlinsky.  “It has been a pleasure for the firm to help guide Slide since its inception through the regulatory process in Florida and its acquisition of policies from St. Johns Insurance last year and now United Property & Casualty Insurance.”

According to Bruce Lucas, CEO and co-founder of Slide, the company expanded to the state as the demand for more affordable insurance increased.

“The (insurance reform) package that was approved in December brings earth-shattering changes to this market,” Lucas previously told PropertyCasualty360.com. “It gives me the confidence to expand my footprint in Florida, especially since all of the policies we are taking on from the UPC transaction will come under the new statutes. They are totally cleansed of the old rules and that makes us a vastly superior underwriting risk for reinsurers.”

The acquired policies represent $272 million in annual premiums, which brings Slide’s total in-force premium value to $560 million. Lucas said among the UPC policies acquired, only around 50 covered homes in Miami-Dade and Broward counties.

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