TALLAHASSEE Setting aside $3 billion in state funds to provide insurers with essential backup coverage garnered attention as Florida lawmakers attempted to strengthen the state’s beleaguered property-insurance system in 2022.
However, a bill approved by Governor Ron DeSantis last week withdrew $2.1 billion of that money, which was anticipated to be unused. In essence, the bill (HB 5013) returned the funds to the state’s coffers, where they may be preserved or utilized for other purposes.
While lawmakers fought for weeks over a new budget, the bill, which was unanimously enacted by the House and Senate during this year’s legislative session, received comparatively little attention.
However, it followed lawmakers’ creation of two schemes, each seeded with $3 billion, during special sessions in 2022 in an attempt to ensure that property insurers would have access to reinsurance to assist in paying storm claims.
A key component of Florida’s insurance system that influences premium costs for businesses and homeowners is reinsurance. In addition to acquiring coverage through the Florida Hurricane Catastrophe Fund, a state reinsurance program, property insurers annually enter the international market to purchase reinsurance.
In the midst of severe financial difficulties in the insurance sector, lawmakers established the Reinsurance to Assist Policyholders, or RAP, program during a special session in June 2022. Utilizing state general funds, the program made $2 billion available for reinsurance, which insurers could use for free if they paid specific loss levels.
Storms that happened during a two-year period were covered by the RAP program. However, it is currently estimated that the scheme will require roughly $900 million, which will allow lawmakers to withdraw $1.1 billion.
Nearly majority of the funds anticipated to be utilized in the program are related to Hurricane Ian, which made landfall in Southwest Florida in September 2022. By the end of 2024, the program had paid out $740.6 million to insurers for Ian’s losses. According to a House staff analysis, the program’s final expenses are not anticipated to surpass $860 million.
Additionally, insurers have applied for funding from the scheme to cover Hurricane Idalia losses in 2023.
Another program, the Florida Optional Reinsurance Assistance program, was established by lawmakers during a special session in December 2022 with $1 billion. For the 2023 hurricane season, the program provided reinsurance for carriers to purchase.
Although five insurance companies participated in the scheme, Hurricane Idalia did not cause enough losses to warrant payment to the carriers.
The House staff review found that all five insurers terminated their contracts with the program, allowing the $1 billion to be restored to state general income.
