Best's Review


Stormy Weather: In Florida, Property Claims Face Litigation Backlog

The 2022 Atlantic hurricane season gets underway this month. As the industry works to resolve backlogged claims, a new wave may once again trap ILS capital and put pressure on markets.
  • Anthony Bellano
  • June 2022
ON ITS WAY: The outer bands of Hurricane Irma start to reach Miami on Sept. 9, 2017. The event caused $33 billion, in 2021 dollars, in insured property losses, according to the Insurance Information Institute. Joe Raedle/Getty Images

ON ITS WAY: The outer bands of Hurricane Irma start to reach Miami on Sept. 9, 2017. The event caused $33 billion, in 2021 dollars, in insured property losses, according to the Insurance Information Institute. (Joe Raedle/Getty Images)


Key Points

  • The Situation: In Florida, the number of litigated claims has more than tripled since 2013. Litigation rose 54% through the first two months of 2022.
  • Causes: Supply chain disruptions and more involvement from public adjusters are other factors that may be keeping claims open longer.
  • Solutions at Hand: Proposed legislation reform in several states may provide some relief and help close claims faster.

After Hurricane Irma hit Florida in 2017, billboards began to appear around the state promoting the services of public adjusters who would convince homeowners to reopen a claim that had already been closed.

Many claims took months to be resolved, delayed by the adjuster tactics and litigation.

Now Florida is facing those troubles again as court postponements, a surge in lawsuits and supply chain issues are complicating the claims resolution process, insurers and analysts say. And these backlogs can ultimately have an impact on reinsurance and third-party capital in the insurance-linked securities market.

“Right or wrong, that claim is now taking multiple years to close out when maybe it should have only taken a month,” said Wes Robinson, national property president at Illinois-based Risk Placement Services Inc.

With claims unresolved, investors have less capital to put into new insurance-linked securities, for instance—a problem that could increase reinsurance prices in the market and can have an impact throughout the entire industry, according to experts.

Hurricane season is gearing up, bringing the expectation of a new class of claims and putting claims adjusters, insurance companies and courts to the test.

Colorado State University hurricane researchers are predicting an above-average 19 named storms and nine hurricanes, of which four could be major hurricanes, for 2022. And that could add to the stockpile of claims.

Hurricanes and other severe storms will bring more claims at a time when two of the states that have been hit the hardest by storms—Florida and Louisiana—are seeing smaller insurance companies fail with others ordered into receivership. Claims those companies were handling are being transferred to those states' insurers of last resort.

Legislators and regulators have been seeking solutions, with the Florida Legislature holding a special session late last month to address potential remedies to help fix the state's failing property insurance market.


Roofing claims lawsuits filed against Florida insurers in 2021, compared to no more than 900 in the state with the next-highest amount.

Source: Insurance Information Institute

Related: Commentary: Troubled Florida Property Market Participants Under Immense Pressure

The Problem With Open Claims

After being shuttered during the COVID-19 pandemic, Florida courts are jammed with more than 116,000 roofing claims lawsuits filed against Florida insurers in 2021, compared to no more than 900 in the state with the next-highest amount, according to Insurance Information Institute spokesman Mark Friedlander. Indeed, 80% of all such litigated claims nationally were filed in Florida, a number that keeps rising despite legislative efforts to keep that number down.

And the litigation hasn't stopped. In 2013, Florida insurers faced 27,000 litigated claims, a number that has more than tripled since then, Florida Citizens Property Insurance Corp. President Barry Gilway said. So far this year, litigation rose 54% through the first two months, according to Friedlander.

While litigation may be keeping claims open longer, Aon Edge President and Chief Executive Officer John Dickson said that's part of the process.

“The judicial system exists to help sort through those disputes and make sure that there is an equitable outcome,” Dickson said. “By the nature of that process, those take longer, and I don't think there's any book of insurance covering any peril of any size that has no litigation. People disagree and our judiciary is there to help in an orderly fashion resolve those disagreements equitably.”

Supply chain disruptions and labor shortages may mean delays for rebuilding post-catastrophe “because contractors need access to sufficient materials and subcontractors,” the National Association of Mutual Insurance Companies said in an email. “Further, COVID complicated the catastrophe claims handling process. For health and safety reasons, claim representatives may have interacted in-person less than before.”

Supply chain issues are impacting all lines of insurance and the claims process itself, given the delays for goods needed for the restoration or repairs, according to Mark Berven, president and chief operating officer of property &casualty insurance at Nationwide Insurance Group.

“Severe storms can put additional pressure in the specific geographies where they occur based on demand for materials,” Berven said.

As Florida demonstrated when storms hit in 2017, claims can be delayed once again due to issues with claims adjusters. Robinson said he's seen situations in which adjusters abandon one claim they are working on for a more lucrative claim elsewhere.

“I had one with five or six different adjusters assigned to it,” Robinson said. “Every time that happens, you have to re-adjudicate that claim. You have to look at where you are in that process, get all the documentation and it's not a very fun process. It's frustrating for everybody involved.”

There are also more adjusters involved in the process since 2017, he said. “We've had many claims that were closed or it was just about closed, and then a public adjuster gets hired, the claim gets reopened and years later now the insurance company is on the hook for millions more than it was going to be on the hook for,” Robinson said.

Wes Robinson Risk Placement Services Inc.

“The actual amount of capital shrank to a point where the reinsurance industry was able to dictate terms like they wanted to. It’s affecting them because they’re shrinking their capacity lines.”

Wes Robinson
Risk Placement Services Inc.

Trapped Capital

The longer it takes to settle a claim, capital can become trapped, preventing it from being invested elsewhere, Robinson said.

AM Best notes in its December 2021 Market Segment Report, Market Segment Outlook: Global Reinsurance, that there is a “growing demand for reinsurance capacity as primary carriers seek stable results and capital efficiency.”

The report said that returns for third-party capital vehicles have become more volatile over the last five years. Loss activity has delayed collateral releases in multiple cases, resulting in elevated levels of trapped capital in the market. This has led some participants to reassess their deployed capital, return measure expectations and time until that capital is released.

In a March special report, AM Best said that total ILS capacity has become a bit harder to measure over the past few years.

“Ascertaining how much ILS capacity is untrapped and deployable is difficult,” AM Best said in Best's Special Report: Re-Underwriting and De-Risking in the Insurance-Linked Securities Market. “Guy Carpenter and AM Best estimate that ILS capacity was about $94 billion at the end of 2021. According to Aon, ILS capital was $97 billion as of June 2021. The ILS capacity figures and reporting periods can diverge considerably amongst industry observers. The only ILS sector that can be objectively determined is the catastrophe bond market.”

The $94 billion estimate from AM Best and Guy Carpenter represents a 3.7% increase in reinsurance capital levels. Total dedicated reinsurance capital expanded 2.8%, to $534 billion over the last year, according to the report. A Guy Carpenter report estimates that trapped capital is less than 5% of the worldwide reinsurance market, which comes out to about $26.7 billion.

$94 billion

Estimated ILS capacity at the end of 2021.

Source: Guy Carpenter and AM Best

Rates and Renewals

Robinson said reinsurance treaty renewals as of January saw a notable increase. The reinsurance market previously lagged behind the direct market because there was so much capital in the market that they just could not get the increases they wanted, he said.

That changed this year. “The actual amount of capital shrank to a point where the reinsurance industry was able to dictate terms like they wanted to. At least, they've been able to move the needle more than they ever have,” Robinson said. “That has an impact on direct insurance because now they are having to manage the capacity they've put out in any one cat region. It's affecting them because they're shrinking their capacity lines.”

RenaissanceRe Chief Executive Officer Kevin O'Donnell, speaking during the company's first-quarter earnings conference call in May, said the reinsurer continued to see double-digit rate increases in property catastrophe ahead of mid-year renewals. But in the Florida market, even with these rate hikes, the reinsurer is unlikely to increase offered limits at June 1 renewals.

“Florida has a social inflation problem that can't be solved by rates because it is ultimately impossible to know how much to charge to cover fraud,” he said.

The Florida market also has a capacity problem due to reduced third-party capital appetite, limited retrocession availability and “severe domestic distress” at many Florida insurers, he said.

In the Best's Special Report: Re-Underwriting and De-Risking in the Insurance-Linked Securities Market, AM Best also said that the substantial losses of recent years have made clear that rising rates are not enough to improve underwriting results for ILS managers and reinsurers.

Losses have led to a diminution of available capacity, particularly for aggregate reinsurance and retrocession. Because of this, AM Best said the January 2022 negotiations had focused on terms and conditions, restructuring coverage features, and raising attachments and deductibles.

During these negotiations, rates were up across the board. According to Trading Risk, rates on line for industry loss warranty contracts rose 5% to 10% from 2021 to 2022.

The price increases were due to losses, as well as trapped capital delays for some renewals, and moves by protection sellers toward covering specific named perils instead of using all natural perils contracts. ILW triggers were sought for remote aggregate and occurrence covers. Capital for riskier Gulf and Florida ILWs declined from previous years.

Related: Florida Carriers Seek Steep, Overlapping Rate Increases

Solutions: Can Legislation Help?

The Florida Legislature's special session in late May was set to address property insurance, civil remedies, reinsurance and changes to building codes to make insurance more affordable, according to the Office of Insurance Regulation. This is being done in an effort to stabilize the property insurance market before the hurricane season begins, according to a proclamation issued by Gov. Ron DeSantis.

Florida's next steps could ultimately replicate the actions taken by other states that also have been beset by catastrophes.

Louisiana Insurance Commissioner Jim Donelon and two insurance committee members recently proposed legislation as part of a six-bill package designed to tackle the problems with adjusters. Known as the “three-adjuster rule,” the proposal says that once three adjusters are assigned to one claim, the insurance company handling the claim must designate one adjuster to serve as the “expert for that claim.” It is based on legislation that has been in place in California since 2019.

In April, the Colorado General Assembly approved a bill aimed at facilitating the claims process for victims of wildfires. The bill mandates insurers pay disaster victims 65% of the value of the contents of their home upfront without requiring the victim to do a comprehensive inventory of their personal property. This is up from 30%. The bill also requires coverage of additional living expenses for 24 months, with the opportunity for two six-month extensions if needed.

“Legislation that will help the industry respond faster, more efficiently and in a more orderly fashion is always welcome,” Dickson said. “If there are things in the industry that we can do, working with property owners, our insurance regulatory officials, our elected officials, working together with a common purpose to help people recover as fast as possible, I'm very supportive of that.”

Anthony Bellano is an associate editor. He can be reached at

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