Over the next year, Florida Insurance Commissioner Mike Yaworsky hopes to see rate stabilization “really hit the consumer” in the state, he told Insurance Insider US in an interview.
“I get a lot of feedback that while everyone wants their rate to decrease, they'd be at least comfortable a little bit if their rates stayed relatively where it was,” he said on the sidelines of the Bermuda Risk Summit on Wednesday.
The only way to solve that equation would be bringing in more private carriers to Florida. In 2023, eight new carriers launched in the state. The previous year, eight went insolvent.
Meanwhile, Florida Citizens’ policy count declined to 1.2 million last year from 1.4 million in 2022 – a trend the commissioner anticipates will continue with Citizens takeouts and natural market forces.
“We expect that to generally continue throughout the course of 2024 with probably another few 100,000 takeouts at least and we'll see where we wind up at the end of the year,” he said.
Yaworsky stepped into his current role in March 2023, mere months after the Florida special session in December 2022 which addressed some of insurers’ key concerns including eliminating one-way attorney fees and getting rid of the state’s controversial assignment of benefits (AOB) right.
As head of the Florida Office of Insurance Regulation (Floir), the commissioner receives takeout requests before deciding to approve them or not. Recently, he has seen “more energy into May and June than I thought, which is interesting.”
Historically, Citizens takeout requests or new carrier admissions are generally slower in summer, as companies tend to refrain from expanding their books during the reinsurance buying season or writing new business in the middle of hurricane season.
“We’ll see it slow,” Yaworsky said. “And then I think at the second half of this calendar year, we'll see another pickup like we saw last year – where there'll be a lot of takeout energy and a good number of companies that come into the state.”
In addition to new capital and new companies, the official noted that the state was also seeing a “rejuvenation” of nationwide carriers.
Leading the pack is State Farm, the state's second largest insurer behind Citizens, which have “not only publicly stated that they’re staying in Florida, but are going to continue to grow”.
“We've seen some other similar sentiment from a few [national] companies – I think we've got one or two that is interested in moving forward,” he said.
In the past year, the commissioner has travelled across the country to have discussions with C-suite executives at national carriers – practically “anyone who wants to talk to me”.
The message he’s been pushing is to “give us a second look” while his office works to understand what other impediments are making carriers hesitant to do business in Florida. But the commissioner is aware that at the end of the day, these massive entities are managing a portfolio and want to have a degree of certainty when adding exposure.
In his view, State Farm has cracked the code on what they need in Florida. “Other companies need to see data that shows they can do that also.”
“But also, I think there is a certain amount of credibility that comes to a company if you're making it – not only existing in Florida, but you're doing well in Florida,” he added. “That can say a lot to your policyholder, to investors, to others that you really know what you're doing in the insurance space.”
Meanwhile, the Florida domestics that remain are “getting their feet back in the water”, carefully opening up and looking at Citizens takeouts.
They had to manage their exposure carefully at one point, the commissioner said. But he argues that the ones who did come out of this are now stronger than they were heading into the crisis.
“They're tested by metal,” he said.
The market is healing
Around late last year, some market sources told this publication that the capital inflow in Florida post-reform had been lackluster compared with expectations. The insurance commissioner disagrees.
“We're moving in the right direction, and generally about the pace that we want to see,” he said.
A faster pace might be good in some ways, but Yaworsky added that he doesn't want the market “to be growing so quickly that you're not monitoring exactly what's going on within the marketplace; not able to see that the decisions being made are responsible and good for the long-term economic viability of the insurer.”
That thought process was also evident in Florida’s 2024 regular session which closed on Monday. Several insurance bills were passed but were far from the major comprehensive reform that took place in 2022.
One of the biggest things the commissioner encouraged anyone who asked for his opinion was “to not do anything too big this year”.
“That's because we've just made some massive changes and it's ultimately what we think is in the best interest of the consumer to let that play out before you start adding new ingredients to the mix,” he said. “Kind of like baking – you can overdo it with all this stuff and not understand what happened if you do a lot.”
One of the few things that Yaworsky did advocate for were changes on the reciprocal statute.
Florida is seeing a lot of reciprocal structures in the new companies coming, the commissioner noted, adding that there was a need to update old regulations in a way that addressed reality as a result.
During Wednesday’s panel discussion “Florida reforms: transformation or illusion”, Orange Insurance Exchange CEO Don Matz said reciprocals are nothing new in Florida but are now back in vogue.
According to Matz, this is partly because the customer is also the owner, so in theory, they are less inclined to file a frivolous or fraudulent claim. Among the eight startups that were approved in Florida last year, more than half were reciprocals.
In the interview with Insurance Insider US, Yaworsky said the old rules on reciprocals regarding the inner workings of the business were not clear, and did not take today’s market into account. The changes were “designed to make sure that the rules are clear for everyone, whether that's the folks that are running [reciprocals], or the consumers involved with them.”
“We're certainly not opposed to reciprocals coming into the state. We just want a good framework on how they operate,” he added.
What’s next?
Once again, the ultimate outcome of Florida’s recovery by year-end by will be heavily influenced by the upcoming June 1 treaty renewals. Based on early anecdotes so far, “the overall feeling is positive, and I'm very hopeful,” Yaworsky said.
In this publication’s early take on June 1 renewals, sources said that reinsurers are pushing to keep rates and retentions in line with last year, while cedants are looking for better terms. That said, overall rate expectations are flattish to single digit increases, which could soften closer to June 1.
We're moving in the right direction, and generally about the pace that we want to see.
In fact, last year’s June renewals didn’t experience the severe capacity crunch that was feared straight after a tumultuous January 1 renewal, which many sources said was one of the hardest reinsurance renewals of their careers. As it turned out, capacity was available for Floridians, although it came at a price.
The commissioner believes this showed “the reinsurance market was opening up and beginning to already see favorable development in Florida and viewing it differently.”
On regulations, Floir has promulgated over 30 new or revised rules that offer granular details about how parties should comply with the law that were passed in the December 2022 special session. Recently, the state has also raised new funding and tools to engage in long term research in Florida’s property insurance market.
So far, data also shows that the tort reform has already taken effect. One of the key points the state monitors is the frequency of non-catastrophic claims, which have dropped north of 50% over the past year, according to the commissioner.
“That's an indicator that perhaps the chain of causation of claim through a vendor, straight to a litigation has basically been broken.”
There is a time lapse factor in the equation to see the full impact of the changed legislation. Most of the tort reform laws didn’t go into effect until after the renewal of each policy in 2023.
“We’re literally at this point, two months into a universe where every single homeowner's policy is under the new law,” noted Yaworsky.
Florida sits at the heart of the US property insurance industry whose annual profitability heavily depends on the landfall of a major hurricane, as was the case with Hurricane Ian in 2022 which pushed the space into a peak hard market. The state, and the insurance industry for that matter, were lucky in 2023 as the only major Category 4 hurricane of the year, Idalia, passed through a very rural area.
Yaworsky said the lack of a significant hurricane in 2023 gave everyone that extra bit of breathing room. But ultimately, his desire for Florida is to have a market that can withstand and serve customers at the end of the day, regardless of what the weather brings.
“The industry needs to be able to sustain hits in Florida, hurricane landfalls in Florida, and still be able to deliver the services they promised and stay in business afterwards,” Yaworsky said.
On that note, the commissioner believes that the state is out of the emergency room, and now has landed in the stability unit.
“We're being monitored closely, but we're definitely moving in the right direction."