All homeowners in Florida have been faced with significant increases in insurance premiums over the past two years. This is true for condominium and homeowners’ associations and for the individual homeowners themselves. Many associations are being impacted by significant premium increases in two consecutive years. This has resulted in 100% increase in insurance cost over 2 years for many associations. This is especially true for condominium associations.
There have been a series of five negative events over the past five years that have compounded on each other and driven the insurance market into a chaotic/unstable time:
- Irma – although not a major hurricane in Florida, it resulted in extensive roof claims that caused several insurance companies to leave Florida. In fact, the legislature put in place emergency protections in 2022 to ease the impact and stop insurance companies from leaving the state.
- Surfside collapse – this tragedy has caused major concern on the part of all insurers and reinsurance companies – inspections are finding many more issues than in the past.
- Increases in liability claims – claims have been escalating over the past few years and associations with open claims have been dropped by their carriers and are having to pay twice as much as in the past.
- Inflation -has driven up the costs of labor and material – requiring increased payouts for repair claims and increases in property appraisals, further driving up premiums.
- Ian – is the 2nd highest hurricane cost impact in the state of Florida, with over $60 billion in damages already, further impacting the financial stability of insurance providers.
According to Paul Mack, President of Assured Partners of Florida, “A big driver of insurance premiums is re-insurance. Also known as insurance for the insurance company. Most carriers that write community association business here in Florida are small and don’t have the bandwidth to assume all the risk, so they buy re-insurance from the big global companies like Berkshire Hathaway, and GE. Those carriers are significantly limiting the amount they offer due to the amount of worldwide catastrophic loss. Florida is also a bad bet for those carriers, since so many property owners have filed “questionable” roof claims following Irma, and the lack of legislative action to create a better environment. We have a very high demand for property insurance capacity and a very low supply. That’s why rates are so high right now, simply put its hard to get especially for older buildings, older roofs, high values with coastal exposures.”
Condos that are needing to renew their insurance right now are seeing major cost increases or short-term extensions because the market is so unstable.
This “worst in 40 years” inflation impact combined with the insurance industry crisis in Florida are both unprecedented and happening at the same time. There is little that can be done to ease the cost increase, so the most important thing you can do as board member is to educate the owners and make sure they understand what is happening, as far in advance as possible.