AM Best

Best’s Commentary: Despite New Reform Law, Florida Property Insurers to Face Continued Financial Pressures


Chris Draghi
Associate Director
+1 908 439 2200, ext. 5043

Christopher Graham
Senior Industry Analyst,
Industry Research & Analytics
+1 908 439 2200, ext. 5743
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jeff Mango
Managing Director, Strategy & Communications
+1 908 439 2200, ext. 5204


OLDWICK - JUNE 03, 2022 03:18 PM (EDT)
AM Best is of the view that despite property insurance reform recently enacted in Florida, property insurers will continue to face financial hardships in the near term. Given that reinsurance companies have become reluctant to take on Florida exposures, many primary carriers who depend on reinsurance still face an existential challenge.

In its Best’s Commentary, “Despite New Reform Law, Florida Property Insurers to Face Continued Financial Pressures,” AM Best also points out that the $2 billion reinsurance program created for insurers to help insulate themselves from risk does not apply to secondary perils, or events less severe than hurricanes, which have been problematic in Florida. The Reinsurance to Assist Policyholders (RAP) program also mandates that participating insurers file correlating rate decreases. While this requirement may provide some slight relief for consumers, it does not address the considerable rate inadequacy issues driven by loss costs, aside from reinsurance pricing. Additionally, primary insurers with already high leverage ratios will find their positions in jeopardy if they are unable to place prudent reinsurance programs.

The changes in the new law regarding litigation issues in Florida, as well as other measures to address roof-damage claims and the language on limiting contingency fee multipliers, may provide some benefit, but it will take time. Florida insurers’ defense and cost containment expenses, as a percentage of incurred losses, is the highest in the United States, and is more than double that of California, the second-highest state. The ultimate effectiveness of these reforms will be contingent on the response from those who have previously taken advantage of the system.

“With an active hurricane season on the on the horizon, punctuated by a potential tropical storm nearing the region, AM Best believes the importance of placing prudent reinsurance coverage in this difficult market paramount, for all layers, not just the new RAP layer,” said Chris Draghi, associate director, AM Best.

To access the full copy of this commentary, please visit .

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.