The Perfect Storm: Why Home Insurance Is Collapsing in Florida

The Perfect Storm: How Florida Got into the Home Insurance Crisis

The following chronicle examines—with a critical eye and attention to public evidence—how a market essential to the daily lives of millions of Floridians entered a cycle of fragility: companies withdrawing or reducing their exposure, skyrocketing premiums, public insurers accumulating systemic risk, and a tangle of political and economic interests complicating any clean solution.

In recent years, several national and local insurers reduced their presence in Florida or drastically adjusted their policy terms, while the public insurer of last resort, Citizens Property Insurance, concentrated immense amounts of exposure to hurricane and catastrophic damage risks. This market reorganization has generated uncertainty about who would pay in the event of a major loss and rekindled the discussion about “assessment rates” (the potential surcharge on all policyholders if Citizens falls short).

Why did the market get to this point? The explanation is multiple. On the one hand, there are the physical risks: more frequent and intense hurricanes, water damage, and a rise in real estate prices in coastal areas that increase insured exposure. On the other hand, there are the financial dynamics: the cost of reinsurance (the coverage insurers buy to protect themselves against catastrophes) has fluctuated sharply in recent years, making the business more expensive and forcing companies to adjust prices or withdraw from particularly risky areas.

Added to this was a legal and procedural factor that until recently was a hallmark of the phenomenon: the proliferation of lawsuits linked to property damage claims, and in particular the documented abuse of the mechanism known as “assignment of benefits” (AOB), whereby third parties—frequently repair companies or dispatchers—claim on behalf of the owner and initiate litigation that multiplies costs. The state responded with legislative reforms (the package known as SB 2-A and subsequent measures) that limited certain litigation incentives and created temporary state reinsurance programs to stabilize the situation.

The figures on litigation and claims are complex and have been interpreted differently by different actors. Some official and regulatory reports argue that the pace of new claims slowed after the reforms and that the market shows signs of stabilizing; other analysts and consumer organizations warn that, even with fewer claims, problems with claims being denied or closed without payment persist, and that the reduction in resources for filing claims leaves many homeowners at a disadvantage compared to insurers that prioritize financial results. The Office of Insurance Regulation (OIR) published detailed reports on the volume and type of claims that demonstrate this complexity.

Politics and Money: The Vested Interests Behind the Legislative Theater
This crisis cannot be separated from politics. The regulatory reform that sought to curb litigation enjoyed powerful political patronage and the support of business chambers and insurance industry associations, which argued that without changes, the market would be unsustainable. At the same time, lobbying and donations linked to the insurance industry—and, in turn, the influence of law firms and claimant interest groups—have driven the public debate. Public databases of contributions and media reports show significant flows from financial industries, including insurance players, to relevant committees and campaigns; meanwhile, media investigations and legislative actions have prompted legislative inquiries into accounting practices and transfers between insurers and their affiliates.

An example of why transparency matters: the state House recently opened an investigation following reports that some companies transferred billions to affiliates, just as they claimed operating losses. The objective of the investigation is to understand whether this structure served to exaggerate financial precariousness and obtain regulatory favors or subsidies. Such actions, and the existence of groups exerting pressure from both sides, fuel citizen distrust.
Axios

Real Effects on Households and Markets
In practice, this translates into nonrenewal notices, premium increases, and a portion of homeowners losing access to affordable private coverage and turning to Citizens. Furthermore, during recent storm seasons, a significant portion of claims were left open for months or closed without payment, leading to litigation and, above all, material and economic losses for families who are unable to recover their assets. Regulators have authorized rate increases and, in some cases, selective rate decreases, but the net outcome for consumers remains volatile, depending on the county and insurer.

State Interventions: FORA, RAP, and Their Reversal
After the peak of the crisis, the Legislature created instruments such as FORA (Florida Optional Reinsurance Assistance) and RAP (Reinsurance to Assist Policyholders)—programs that offered layers of state reinsurance to attract private companies and contain premiums—and approved procedural limitations on litigation. However, in 2025, part of that state framework was reduced or reversed: the political debate led to cuts to the state’s fiscal exposure and modifications that demonstrate that the short-term solution of public support for reinsurance was not conceived as permanent. It is important to note that these legislative swings also change the signals to private capital.

What can (and should) be done from an ethical and good governance perspective?
The author of this article maintains that there are three unavoidable priorities: (1) full transparency in insurers’ finances and in any transfers to affiliates (to prevent losses from being masked and aid requests); (2) open markets and real competition, which involve attracting solvent capital without giving away taxpayer protection or tolerating opaque practices; and (3) reasonable consumer protection, which prevents mass claim denial tactics and preserves accessible and fair avenues for recovery for citizens. Public and private institutions have proposed technical measures—from improving the granularity of reporting by zip code to promoting catastrophe bonds and better risk assessment models—that, if implemented without political capture, could moderate market volatility.

Accountability and Democratic Oversight
The home insurance crisis in Florida is the sum of climatic, financial, legal, and political forces. Fixing it requires leaders willing to prioritize market integrity and citizen protection over the short-term profits of lobbyists. The practical lesson is simple: without transparency, stable rules, and genuine competition, any attempt at a “fix” will end up benefiting those with the best access to the halls of power and leaving the rest of the households out in the cold. The recurrence of future crises depends less on the wind than on the institutional design that society chooses—and that decision, inevitably, involves accountability and public oversight.