Of Fevers and Thermometers: The Coming Florida Insurance Market Gets the Shivers.

• Author: Acunto, Steve

* Ian hit Cape Cayo at 155 m.p.h. Wallop. Too late to start thinking. Too late for "feel good" plans.

In a flash, first responders and insurers were hit with tidal waves that have yet to subside.

But in Ian's wake, there has been time to reflect for real on the insurance industry's performance, its readiness and its future in the Sunshine State. While some domestic insurers, like Centauri among others, fared quite well and served clients amiably and effectively, others are close to insolvency - or there already--for reasons other than the direct impact of Ian.

Thirty years after Hurricane Andrew devastated Florida's residential property insurance marketplace, many in Florida are - incredibly - blaming the thermometer - the measuring instruments of insurer solvency - for the fever afflicting the marketplace. In 1996, when the major insurer rating agencies avoided the newly capitalized insurers depopulating the Florida Residential Property and Casualty Joint Underwriting Association (JUA), Demotech, Inc., the insurer rating agency accepted by Fannie and Freddie since 1990, stepped up to rate the insurers that would de-populate the JUA.

Leading up to Ian, Demotech's warnings in the form of rating downgrades, using their standard of "claims paying ability", were seen as purely "negative" and destructive, as if the thermometer caused the fever.

Demotech long ago inserted itself into one of the most difficult, catastrophe prone markets in the world. By doing so, the rating agency grew from rating a negligible market share of Florida's premium volume to nearly 60% of the homeowners' volume in the state. Year after year, and hurricane after hurricane, Demotech rated carriers, many of which were heavily reinsured by the largest and finest reinsurers in the world, paid claims and responded responsibly to the other challenges of that marketplace.

By the time it became well known that Florida's 8% of the unresolved Homeowners' claims in the country were responsible for nearly 80% of the litigated homeowner's claims in the country, Demotech had already underlined that a veritable litigation explosion was plaguing insurers, those it reviewed and rated, and others. They were so familiar with the issue that, in March, 2022, when the legislature adjourned without deliberating legislative reforms, Demotech publicly asked the Governor, House and Senate to call a special session to introduce legislative reforms.

The Governor called for a special session...