Insurer’s Retreat in Florida Signals Crisis With No Easy Fix
Insurers are trapped in a riddle: In a world where the risk of costly disasters is rising but high premiums are squeezing policyholders and angering state regulators, how can they continue to make money?
That question was at the center of the decision by Farmers Insurance this week to stop renewing almost a third of the policies it has written in Florida, becoming the latest insurer to pull business from a state as the industry grapples with the rising costs of covering damage tied to floods, hurricanes, wildfires and other climate-related disasters.
Farmers, one of America’s biggest home insurers, didn’t say what specifically led to its decision. Was the cost of payouts too high in recent years, which saw record-setting numbers of billion-dollar disasters, just as rates charged by reinsurers, which sell insurance to insurers, were rising? Was it too many lawsuits from policyholders? Or is Farmers playing a game of chicken with state regulators, hoping that walking away now will give it leverage to charge customers more in the future?
“A lot of insurers have been losing a lot of money in Florida and they’ve been threatening to leave for years,” said Daniel Schwarcz, a professor at the University of Minnesota Law School who specializes in insurance.
Source: The New York Times
