Four things businesses expanding into Florida need to know about insurance coverage

The state of the Florida property insurance market has become increasingly challenging recently, with a surge in natural disasters over the past three years causing more damage to the peninsula than in the previous decade. Even if you avoid the direct impact of a storm, you will still feel the financial repercussions through increased insurance costs.

This challenging market has forced retail brokers to rely heavily on wholesale partners to secure adequate terms, but even this is becoming an arduous task. The current climate necessitates even deeper diligence, from loss pick analytics to the almost insurmountable challenge of placing wind coverage on anything other than Lloyd’s paper.

Given these obstacles, it is imperative to understand the best practices for navigating the Florida property market and to determine the most feasible solution for your business. How can you secure a reasonable cost for your insurance, and what is the current reality of the costs in the market?

• Timing is everything: While the market is costly, capacity is still available specifically for Florida, albeit with changing appetites per carrier and fluctuating rates. This rapidly evolving market means that rates and capacity can shift in weeks based on carrier analytics of CAT and wind loss picks. If you aren’t happy with a quote and have time to spare, you may want to sit tight and try again in a few weeks or months. Or if you are pleased with a quote, you will need to move quickly to lock in the rate.

• Secure an insurance partner who knows Florida: Clients must work with underwriters who understand the intricacies of the Florida market, not just the coastal regions. Building relationships with underwriters who understand how to layer property, build a tower, and secure the best rates is crucial. Although carriers are writing policies for Florida property, the underwriting process has become slower and more rigorous. Clients must be prepared to give underwriters at least 90 days to complete comprehensive diligence for significant property risks, which may involve on-site loss control, a formal flood mitigation plan, and other diligence for new construction versus the reuse or redevelopment of an asset.

• Be prepared for higher insurance costs: Clients must also comprehend the reality of the market and prepare for the associated costs. Clients with older and poorly maintained assets will not find “cheap” insurance and proximity to water will inevitably result in higher pricing than inland properties. Certain occupancies such as restaurants, habitational, wood products, and frame builders also come with additional pressures beyond pricing increases. Carriers increasingly require higher deductibles, necessitating the purchase of deductible buy-down coverage, with split deductible options between “All Other Perils,” Named Storm, Water, Flood, and Earthquake.

• Be diligent with your lenders: Finally, clients must maintain diligent relationships with their lenders to determine the best economics available for any asset purchase or development, as trends show lenders requiring higher property limits based on similar diligence and analytics to carriers’ loss picks. While replacement cost from a general contractor’s perspective may suggest one value, a lender relationship, and underwriting will likely recommend something different.

Matt Mallory is CEO of the Mallory Agency, a leading property and casualty insurance broker serving clients across the U.S., UK, and USVI. Matt leads the CRE practice for the firm advising developers and investors of large and high-valued properties. Contact him at mattm@malloryagency.com.  

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