2015 Ends on a Storm-Free Note
As 2015 comes to a close, several aspects of this year’s insurance market stand out. Each year presents its share of successes and its share of challenges, which is expected in a cyclical industry. However, on balance we will remember 2015 for its continued stability in several key insurance markets.
In Florida, our view of the property insurance market is heavily influenced by the weather, and in 2015 the weather patterns again were favorable. This year marked the 10th consecutive year without significant storm activity. This in turn resulted in reduced reinsurance costs and, in many cases, continued surplus growth for property insurers. We all know that hurricanes will again affect Florida at some point in the future, so enhancements to insurers’ financial strength are important in these storm-free years.
Not all trends in the property market are positive, though. Florida continues to see substantial numbers of water damage claims, and a rapid expansion of claims in which vendors accept “assignments of benefits.” Although the industry has been pointing to these trends for some time now, they came into focus in 2015 in connection with Citizens Property Insurance Corporation’s annual rate filings. Citizens quantified how these issues are causing policyholders to pay more for insurance than they otherwise would, particularly in South Florida.
In the workers’ compensation market, all eyes remain on the Florida Supreme Court as we await key decisions affecting the workers’ compensation system. Workers’ comp rates have gone down significantly since legislative reforms adopted in 2003. Court cases, however, have begun to chip away at these reforms and could cause significant future rate increases if the Supreme Court ultimately determines that the current workers’ compensation laws are too restrictive.
The effectiveness of Personal Injury Protection (PIP) reforms also remains uncertain. Concerns with the PIP system seem to lead to annual suggestions by some policymakers that the system should be scrapped altogether.
Overall, 2015 was a stable year for property and casualty markets in Florida. At the same time, several key issues are on the horizon and will attract significant attention as we head into 2016.