Earlier this year, I was set on buying my first home.
Over the years I’ve managed to save enough for a decent down payment and as the son of working-class immigrants in this country, homeownership would be a way for me to build equity and stabilize my long-term finances as I set roots in Florida.
After considering the idea, I gave up on it due to various reasons, including exorbitant housing costs, rising interest rates, and a crumbling property insurance market in Florida that has become a nightmare to navigate.
The property insurance issue has come into focus as Hurricane Ian wreaked havoc across the southwestern region of Florida this week. As the storm was making landfall on Wednesday, the South Florida Sun Sentinel reported that insurance customers throughout the state face the possibility of having to help pay for damages caused along Ian’s path. In 2017, Hurricane Irma caused $32 billion worth of property damages and this storm is sure to cost Florida just as much or more.
As Ian loomed over the state, a sixth insurance company went under. If this storm forces another company to go bankrupt, insured Floridians will have to pay outstanding claims from those insurers through surcharges amounting up to 2 percent of their insurance bulls levied by the Florida Insurance Guaranty Association, which is already charging policyholders to cover debts of five failed insurers.
How did we get here?
Floridians now have the highest property-insurance rates in the nation with the average premium of $4,231 nearly tripling the nationwide average of $1,544. The issue stems largely from a lack of financial regulation and out-of-control litigation that consists of countless roofing scams and fraudulent damage claims that insurance companies end up settling due to being overwhelmed by the sheer number of these lawsuits.
Climate change also increases financial risk for these insurers. As storm surges and sea level rise threaten properties, there is less of a financial incentive for companies to operate in a state that regularly sees billions of property damages. As Fred Grimm eloquently put it in an op-ed in the South Florida Sun Sentinel, “Gov. Ron DeSantis described Ian as a 500-year storm. Nowadays, insurers grapple with 500-year disasters as regular occurrences.”
The increasing frequency of extreme weather events only adds to the uncertainty for these insurers to operate in Florida, creating a market that is extremely volatile, and with potential reconstruction costs post-Hurricane Ian estimated at more than $258 billion, there is more uncertainty than ever.
To add some stability to Florida’s crumbling property insurance market, the state set up its own insurer called Citizens Property Insurance Corporation, most commonly referred to as Citizens. This state-run company is currently sitting on top of a good amount of cash reserves but the number of its policyholders ballooned by half a million in the last two years, to a total of 1.3 million total. That means a lot of financial exposure for Citizens in the case of a catastrophe like the one currently underway in Florida due to Hurricane Ian.
Florida Governor Ron DeSantis hasn’t done much to address this crisis and since he took office in 2019, Floridians have suffered a 112.8% increase in premiums. Earlier this year, the Republican-led state legislature gave insurers a $2 billion taxpayer bailout during a special session to try and help bolster the market while also attempting to force insurers to not deny coverage to homeowners with newer roofs.
It hasn’t worked, while insurance companies got a huge bailout from our tax dollars, we got higher premiums while companies are still going under in the state. The law establishing this bailout provided no guarantee that insurers would pass any savings to Floridians and many filed for rate increases to cover the higher cost of private reinsurance, which they buy to cover themselves in the event of major disasters.
Democratic State lawmaker Anna Eskamani said at the time that the deal worked out during the special session was “more about bailing out the insurance industry than giving consumers a break.” Rather than stabilizing the situation, things are shakier than ever and Hurricane Ian adds even more uncertainty.
Floridians who now face the daunting prospect of rebuilding their lives after this catastrophe will be faced with even more expensive insurance premiums while tackling construction costs. A lot of homeowners didn’t even have flood insurance.
I have zero expectations of Ron DeSantis or his Republican colleagues doing anything to tackle this property insurance debacle in Florida. DeSantis is completely in the pocket of special interests groups, who have bankrolled his reelection campaign and helped him amass a titanic campaign war chest. I can’t help but be frustrated when I look at the situation in Florida and the horrible political leadership we have. It’s people like me who will continue missing out on opportunities to become homeowners because of the financial unfeasibility of buying into the housing market in this state. We deserve better.
Thomas Kennedy is an elected Democratic National Committee member from Florida. Twitter: @tomaskenn
This is an opinion column that solely reflects the opinions of the author.