2024 Property Insurance Market Update
By Doug Sawyer
After the challenges of 2023, business and property owners will no doubt be hoping for relief in the 2024 property insurance market.
However, rising rates and reduced underwriting capacity may continue to be issues in the new year, particularly in difficult markets like Florida. Let’s take a look at what’s happening now and what to expect moving forward.
Recent Property Rate Hikes
Insurance rates have been increasing across most property and casualty lines, not just for commercial property insurance. CIAB says the third quarter of 2023 marked the 24th consecutive quarter of commercial property and casualty rate increases. When looking at all insurance lines (including commercial property, auto, general liability and other P&C lines), the average premium rate increase across all account sizes was 8.1%, and medium accounts saw an average increase of 8.9%.
However, the largest average rate hikes are currently in commercial property, which saw an increase of 17.1% in the third quarter. This is down slightly from the second quarter, when the average rate hike reached 20.4%, but it still represents a significant double-digit increase. Worse, that’s just the average – some accounts are seeing much steeper hikes.
Property Markets in Crisis
Although property owners around the country are dealing with rising costs, those located in certain regions are having a much more challenging time.
Some carriers are pulling out of difficult markets. According to CBS News, many California homeowners are receiving notices of non-renewal. Several insurance companies have stopped writing business in the state – according to Axios, this includes Allstate and State Farm, both of which have stopped accepting new applications for homes and commercial property. Furthermore, The Washington Post says Farmers Insurance is leaving Florida and News Nation says Progressive is not renewing 100,000 policies in Florida.
Other carriers are issuing massive rate hikes. News Nation says some homeowners policies in Florida now cost six figures a year. One man says the new rate for his four-bedroom home in West Palm Beach is $121,000, which is seven times more than what he paid the year before. Business owners are also encountering challenges: Property Casualty 360 says some commercial property owners in Florida are facing insurance hikes of 125% or more.
Growing Climate Risks
It’s no coincidence that the two states experiencing the greatest levels of property insurance turmoil are California and Florida: the former is plagued by wildfires and the latter is vulnerable to hurricanes. Rising natural disaster losses have had a notable impact on the property insurance market
The National Oceanic and Atmospheric Administration (NOAA) says the U.S. experienced a historic number of billion-dollar disasters in 2023. A total of 28 disasters each caused losses in excess of $1 billion. The previous record, set in 2020, was 22 billion-dollar events. The 28 events included Hurricane Idalia in Florida.
New Insurance Rules in Florida
Insurers are also dealing with a high volume of lawsuits
The Insurance Information Institute says 79% of all homeowners insurance lawsuits occur in Florida, even though only 9% of all U.S. property insurance claims occur in the state. This may be due to Florida’s generous attorney-fee mechanisms as well as assignment of benefits (AOB) abuse, in which unethical contractors have policyholders sign AOB forms and then file lawsuits without the policyholders’ knowledge.
Florida has passed several laws intended to provide relief to property owners who are facing rising insurance rates. In May 2023, Governor DeSantis signed three bills designed to strengthen the state’s property insurance market, expand programs for home hardening and hazard mitigation, and provide additional protection against bad actors. More legislation may be coming. According to Housingwire, proposed House Bill 809 would require insurers to offer policies that only cover the unpaid mortgage principal.
The Condo Insurance Market
Another insurance crisis is brewing in the condo insurance market. Once again, Florida is ground zero.
After the condo collapse in Surfside, Florida passed legislation with new requirements for condo insurance inspections, budgets based on structural integrity reserve studies (SIRS), and increased transparency. While condo associations scramble to comply with the new requirements, they are facing spikes in insurance premiums. WFLA says one association in Tampa Bay saw its coverage costs surge by nearly 1,000%. In that particular case, the association had an issue that made it unattractive to insurers. Such issues are challenging in good markets but a nightmare in the current market. Even properties considered good risks may see substantial rate increases.
Many of the factors responsible for the rising rates and reduced capacity will continue to impact the 2024 property insurance market. To secure coverage in this challenging market, it’s smart to have an experienced and well-connected independent brokerage by your side. Century Risk Advisors can help you explore your coverage options.