- AIG and Farmers Group are reducing policy coverages in Florida due to its vulnerability to natural disasters.
- AIG will limit coverage to higher-value properties in approximately 200 zip codes nationwide but has placed a focus on Florida, where they have previously reduced insurance writing.
- Farmers Group has stopped offering new homeowners insurance policies in Florida due to high reconstruction costs and frequent catastrophic events.
Insurance giants AIG and Farmers Group announced on Friday their decisions to scale back policy coverages in Florida due to its vulnerability to natural disasters like hurricanes and floods.
Per company communications, AIG plans to limit its coverage to higher-value properties in approximately 200 zip codes across the United States, with a specific emphasis on Florida, which has previously experienced another reduction in insurance writing from AIG.
Similarly, Farmers Group has ceased offering new homeowners insurance policies in the state, citing the escalating costs of reconstruction and the frequency of catastrophic events in the region. An attempt to make contact with AIG went unanswered, though Farmers told The Capitolist that the decision was predicated on rising reconstruction costs.
“With catastrophe costs at historically high levels and reconstruction costs continuing to climb, we implemented a pause on writing new homeowners policies to more effectively manage our risk exposure,” said a Farmers communications officer.
The impact is particularly concerning for properties deemed uninsurable, as homeowners face exposure to significant risks and potential difficulties in selling their homes. The surge in losses, particularly from events such as hurricanes and flooding, has prompted reinsurers to increase coverage costs, including the state-backed Citizens Property Insurance Corporation, which lobbied for authorization to implement a double-digit rate increase on Thursday.
Kin Interinsurance Network and First Community Insurance Co. also appeared before the state’s Office of Insurance Regulation (OIR) this year seeking authorization to increase rates. First Community sought an average 44.8 percent increase for homeowner multi-peril policies, while Kin filed for an average 61.5 percent increase on such policies.
Both policy writers claimed a need to raise rates following a busy hurricane season that saw billions of dollars of damage statewide.
Insurance holders in Florida will also experience a one-percent rate hike due to an emergency assessment approved by the Florida Insurance Guaranty Association (FIGA) in April. The evaluation is an additional fee charged by FIGA on its members to raise funds for the payment of covered claims linked to the liquidation of United Property & Casualty Insurance Company.
The OIR imposed a similar one percent emergency assessment on all covered lines of business except auto, meaning that all insurance companies in Florida, except for auto insurance, will also be charged the extra one percent fee.
Per the published order, FIGA is borrowing $150 million in short-term financing and will subsequently issue $750 million in revenue bonds to pay off the short-term financing and to pay the remaining claims.
It is expected that policy writers will transfer the supplementary fees to their customers, and they have been provided with an unspecified time frame to implement the one percent charge, which will continue until the bond is entirely settled.
“FIGA members will be able to recoup the one percent emergency assessment from their policyholders over the Assessment Year starting October 1, 2023 through September 30, 2024 and continuing until the bonds have been paid in full,” reads the order. “FIGA will send a notice to all Member Insurers on or before June 30 of the final Assessment Year in which the Bonds will have been repaid in full and are no longer outstanding, informing Member Insurers that they may end collection of the 1% emergency assessment on September 30 of that final Assessment Year.”