The Institutes’ Pete Miller and Francis Bouchard of Marsh McLennan discuss how AI is transforming property/casualty insurance as the industry attacks theclimate crisis.
“Climate” is not a popular word in Washington, D.C., today, so it would take a certain audacity to hold an event whose title prominently includes it in the heart of the U.S. Capitol.
For two days, expert panels at the Ronald Reagan Building and International Trade Center discussed climate-related risks – from flood, wind, and wildfire to extreme heat and cold – and the role of technology in mitigating and building resilience against them. Given the human and financial costs associated with climate risks, it was appropriate to see the property/casualty insurance industry strongly represented.
Peter Miller, CEO of The Institutes, was on hand to talk about the transformative power of AI for insurers, and Triple-I President and CEO Sean Kevelighan discussed – among other things – the collaborative work his organization and its insurance industry members are doing in partnership with governments, non-profits, and others to promote investment in climate resilience. Triple-I is an affiliate of the Institutes.
Sean Kevelighan of Triple-I and Denise Garth, Majesco’s chief strategy officer, discuss how to ensure equitable coverage against climate events.
You can get an idea of the scope and depth of these panels by looking at the agenda, which included titles like:
Building Climate-Resilient Futures: Innovations in Insurance, Finance, and Real Estate;
Fire, Flood, and Wind: Harnessing the Power of Advanced Data-Driven Technology for Climate Resilience;
The Role of Technology and Innovation to Advance Climate Resilience Across our Cities, States and Communities;
Pioneers of Parametric: Navigating Risks with Parametric Insurance Innovations;
Climate in the Crosshairs: How Reinsurers and Investors are Redefining Risk; and
Safeguarding Tomorrow: The Regulator’s Role in Climate Resilience.
As expected, the panels and “fireside chats” went deep into the role of technology; but the importance of partnership, collaboration, and investment across stakeholder groups was a dominant theme for all participants. Coming as the Trump Administration takes such steps as eliminating FEMA’s Building Resilient Infrastructure and Communities (BRIC) program; slashing budgets of federal entities like the National Oceanographic and Atmospheric Administration (NOAA) and the National Weather Service (NWS); and revoking FEMA funding for communities still recovering from last year’s devastation from Hurricane Helene, these discussions were, to say the least, timely.
Helge Joergensen, co-founder and CEO of 7Analytics, talks about using granular data to assess and address flood risk.
In addition to the panels, the event featured a series of “Shark Tank”-style presentations by Insurtechs that got to pitch their products and services to the audience of approximately 500 attendees. A Triple-I member – Norway-based 7Analytics, a provider of granular flood and landslide data – won the competition.
Earth Day 2025 is a good time to recognize organizations that are working hard and investing in climate-risk mitigation and resilience – and to recommit to these efforts for the coming years. What better place to do so than walking distance from both the White House and the Capitol?
The Trump Administration’s unwinding of the Building Resilient Infrastructure and Communities (BRIC) program and cancellation of all BRIC applications from fiscal years 2020-2023 reinforce the need for collaboration among state and local government and private-sector stakeholders in climate resilience investment.
Congress established BRIC through the Disaster Recovery Reform Act of 2018 to ensure a stable funding source to support mitigation projects annually. The program has allocated more than $5 billion for investment in mitigation projects to alleviate human suffering and avoid economic losses from floods, wildfires, and other disasters. FEMA announced on April 4 that it is ending BRIC .
Chad Berginnis, executive director of the Association of State Floodplain Managers (ASFPM), called the decision “beyond reckless.”
“Although ASFPM has had some qualms about how FEMA’s BRIC program was implemented, it was still a cornerstone of our nation’s hazard mitigation strategy, and the agency has worked to make improvements each year,” Berginnis said. “Eliminating it entirely — mid-award cycle, no less — defies common sense.”
While the FEMA press release called BRIC a “wasteful, politicized grant program,” Berginnis said investments in hazard mitigation programs “are the opposite of ‘wasteful.’ “ He pointed to a study by the National Institute of Building Sciences (NIBS) that showed flood hazard mitigation investments return up to $8 in benefits for every $1 spent.
“At this very moment, when states like Arkansas, Kentucky, and Tennessee are grappling with major flooding, the Administration’s decision to walk away from BRIC is hard to understand,” Berginnis said.
Heading into hurricane season
Especially hard hit will be catastrophe-prone Florida. Nearly $300 million in federal aid meant to help protect communities from flooding, hurricanes, and other natural disasters has been frozen since President Trump took office in January, according to an article in Government Technology.
The loss of BRIC funding leaves dozens of Florida projects in limbo, from a plan to raise roads in St. Augustine to a $150 million effort to strengthen canals in South Florida. According to Government Technology, the agency most impacted is the South Florida Water Management District, responsible for maintaining water quality, controlling the water supply, ecosystem restoration and flood control in a 16-county area that runs from Orlando south to the Keys.
“The district received only $6 million of its $150 million grant before the program was canceled,” the article said. “The money was intended to help build three structures on canals and basins in North Miami -Dade and Broward counties to improve flood mitigation.”
Florida’s Division of Emergency Management must return $36.9 million in BRIC money that was earmarked for management costs and technical assistance. Jacksonville will lose $24.9 million targeted to raise roads and make improvements to a water reclamation facility.
FEMA announced the decision to end BRIC the day after Colorado State University’s (CSU) Department of Atmospheric Science released a forecast projecting an above-average Atlantic hurricane season for 2025. Led by CSU senior research scientist and Triple-I non-resident scholar Phil Klotzbach CSU research team forecasts 17 named storms, nine hurricanes – four of them “major” (Category 3, 4, or 5). A typical season has 14 named storms, seven hurricanes – three of them major.
Nationwide impacts
More than $280 million in federal funding for flood protection and climate resilience projects across New York City — “including critical upgrades in Central Harlem, East Elmhurst, and the South Street Seaport” – is now at risk, according to an article in AMNY. The cuts affect over $325 million in pending projects statewide and another $56 million of projects where work has already begun.
Senate Majority Leader Chuck Schumer and Gov. Kathy Hochul warned that the move jeopardizes public safety as climate-driven disasters become more frequent and severe.
“In the last few years, New Yorkers have faced hurricanes, tornadoes, blizzards, wildfires, and even an earthquake – and FEMA assistance has been critical to help us rebuild,” Hochul said. “Cutting funding for communities across New York is short-sighted and a massive risk to public safety.”
According to the National Association of Counties, cancellation of BRIC funding has several implications for counties, including paused or canceled projects, budget and planning adjustments, and reduced capacity for long-term risk reduction.
North Dakota, for example, has 10 projects that were authorized for federal funding. Those dollars will now be rescinded. Impacted projects include $7.1 million for a water intake project in Washburn; $7.8 million for a regional wastewater treatment project in Lincoln; and $1.9 million for a wastewater lagoon project in Fessenden.
“This is devastating for our community,” said Tammy Roehrich, emergency manager for Wells County. “Two million dollars to a little community of 450 people is huge.”
The cancellation of BRIC roughly coincides with FEMA’s decision to deny North Carolina’s request to continue matching 100 percent of the state’s spending on Hurricane Helene recovery.
“The need in western North Carolina remains immense — people need debris removed, homes rebuilt, and roads restored,” said Gov. Josh Stein. “Six months later, the people of western North Carolina are working hard to get back on their feet; they need FEMA to help them get the job done.”
Resilience key to insurance availability
Average insured catastrophe losses have been on the rise for decades, reflecting a combination of climate-related factors and demographic trends as more people have moved into harm’s way.
“Investing in the resilience of homes, businesses, and communities is the most proactive strategy to reducing the damage caused by climate,” said Triple-I Chief Insurance Officer Dale Porfilio. “Defunding federal resilience grants will slow the essential investments being made by communities across the U.S.”
Flood is a particularly pressing problem, as 90 percent of natural disasters involve flooding, according to the National Flood Insurance Program (NFIP). The devastation wrought by Hurricane Helene in 2024 across a 500-mile swath of the U.S. Southeast – including Florida, Georgia, the Carolinas, Virginia, and Tennessee – highlighted the growing vulnerability of inland areas to flooding from both tropical and severe convective storms, as well as the scale of the flood-protection gap in non-coastal areas.
Coastal flooding in the U.S. now occurs three times more frequently than 30 years ago, and this acceleration shows no signs of slowing, according to recent research. By 2050, flood frequency is projected to increase tenfold compared to current levels, driven by rising sea levels that push tides and storm surges higher and further inland.
In addition to the movement of more people and property into harm’s way, climate-related risks are exacerbated by inflation (which drives up the cost of repairing and replacing damaged property); legal system abuse, (which delays claim settlements and drives up insurance premium rates); and antiquated regulations (like California’s Proposition 103) that discourage insurers from writing business in the states subject to them.
Thanks to the engagement and collaboration of a range of stakeholders, some of these factors in some states are being addressed. Others – for example, improved building and zoning codes that could help reduce losses and improve insurance affordability – have met persistent local resistance.
As frequently reported on this blog, the property/casualty insurance industry has been working hard with governments, communities, businesses, and others to address the causes of high costs and the insurance affordability and availability challenges that flow from them. Triple-I, its members, and partners are involved in several of these efforts, which we’ll be reporting on here as they progress.
Chief Economist and Data Scientist, Dr. Michel Léonard
Recent tariffs issued by U.S. President Donald Trump are on track to increase the price of parts and materials used in repairing and restoring property after an insurable event. Analysts and economists, predict these price hikes will lead to higher claim payouts for P&C insurers and, ultimately, higher premiums for policyholders.
After making several announcements since early March 2025, on April 2, President Trump signed an executive order imposing a minimum 10 percent tariff on all U.S. imports, with higher levies on imports from 57 specific trading partners. A general tariff rate became effective on April 5, while tariffs on imports from the targeted nations, ranging from 11 to 50 percent, took effect on April 9. A 25 percent tariff applies to all steel and aluminum imports and cars. President Trump says he might consider a one-month exemption to the auto industry, but as of this writing, no changes have been issued.
Generally, tariffs can bring in revenue for the issuing government but lower the operating margin for impacted domestic businesses. Inventory and supply chain managers may attempt to stockpile in advance of the new rates becoming effective, which in turn can spike demand and quickly spike prices for sought-after items. Eventually, these cost hikes get passed on to consumers.
Nonetheless, to ride out the situation, inventory and supply chain managers need a fundamental level of predictability regarding what the levies will cover, what the rates are, and when these rates go into effect. The timing and scope of President Trump’s tariff policies have been challenging to nail down, including for many goods particularly relevant to construction and auto manufacturing. For example, his initially declared rates for major trading partners – Canada, Mexico, the European Union, and China – have fluctuated as these nations announced reciprocal tariffs, and those levies, in turn, were met with higher US rates.
Then, on April 9, President Trump declared a 90-day pause on tariffs. This change was actually not a true pause but a reduction of previous rates for several countries to 10 percent, except for China. The White House has declared on April 10 that the previously announced 125 percent rate against goods from China is actually now 145 percent.
According to S&P, the levy on auto industry imports has been comparatively less dynamic as, despite confusing announcements from the White House, there has been no change to President Trump’s 25 percent rate declared on March 26, “which applies to all light-vehicle imports, regardless of country. The 25 percent tariff includes auto parts as well as completely built up (CBU) vehicles. The CBU autos tariff went into effect on April 3, 2025, while the auto parts portion is due to come into effect on May 3, 2025.”
As insurers grapple with risk management and inflationary pressures, other challenges posed by the tariffs can include issues for policyholders, specifically coverage affordability and availability. One downstream side effect may be the increased risk of expanding the protection gap – uninsurance and underinsurance (UM/UIM) due to higher premiums and higher valuations that can come into play when materials costs rise. Across the fifty states and the District of Columbia, one in three drivers (33.4 percent) were either uninsured or underinsured in 2023, according to a recent report, Uninsured and Underinsured Motorists: 2017–2023, by the Insurance Research Council (IRC), affiliated with The Institutes.
Our Chief Economist and Data Scientist, Dr.Michel Léonard, shares his analysis of how the tariffs may impact the P&C Insurance industry.
“There’s no crystal ball”, say Dr. Léonard, “but prudent risk underwriting and risk management suggests the use of scenarios and increased price ranges for different tariff levels, the more precise impact of which can be updated based on actual price increases for individual prices.”
Dr. Léonard outlines three types of P&C replacement cost scenarios given different tariff ranges:
1) For single-digit tariffs, while inventories last, higher prices below that tariff’s rate;
2) for single-digit tariffs on goods still economically viable post-tariffs, higher prices up to the tariff’s rate; and
3) for single and double-digit tariffs on goods no longer economically viable, a multiple of the pre-tariff price for tariff-evading goods.
Triple-I remains committed to keeping abreast of these and other developments crucial to the insurance industry’s future. For more information, we invite you to stay tuned to our blog and join us at JIF 2025.
A record number of bills targeting third-party litigation funding are under consideration across the United States, with Georgia and Kansas already passing disclosure measures, according to an analysis by Insurance Insider.
The U.S. Government Accountability Office defines third-party litigation funding as “an arrangement in which a funder who is not a party to the lawsuit agrees to help fund it.” Global multi-billion-dollar investing firms have made it their sole or primary business and are experiencing strong growth. Because the market lacks transparency, estimates on its size can vary but, according to Swiss Re, more than half of the $17 billion invested into litigation funding globally in 2020 was deployed in the United States. Swiss Re estimates the market will be as high as $30 billion by 2028.
Meanwhile, affordability of insurance coverage – especially for commercial auto products – has come under threat from increases in litigation and claim costs. The national surge in legislation seeking to rein in this practice reflects growing concerns about its lack of transparency and undue influence of litigation financing by dark-money investors – many of them outside the United States.
Thirty-five separate bills have been introduced in U.S. statehouses so far this year. The Kansas bill was signed into law by Gov. Laura Kelly, and the Georgia bill is expected to be signed by Gov. Brian Kemp. Similar legislation is advancing through various committees in Arizona, California, Massachusetts, New Jersey, and Oklahoma and have been proposed in more than two dozen other states.
The efforts are not only progressing at the state level. The U.S. House of Representatives is advancing HR 1109 – The Litigation Transparency Act of 2025 – which would regulate third-party litigation funding in federal court cases. A similar bill was introduced in 2024 but did not advance out of committee.
Third-party litigation funding is just one aspect of the larger issue of legal system abuse that contributes to challenges related to property/casualty insurance availability and affordability.
Even as California moves to address regulatory obstacles to fair, actuarially sound insurance underwriting and pricing, the state’s risk profile continues to evolve in ways that impede progress, according to the most recent Triple-I Issues Brief.
Like many states, California has suffered greatly from climate-related natural catastrophe losses. Like some disaster-prone states, it also has experienced a decline in insurers’ appetite for covering its property/casualty risks.
But much of California’s problem is driven by regulators’ application of Proposition 103 – a decades-old measure that constrains insurers’ ability to profitably write business in the state. As applied, Proposition 103 has:
Kept insurers from pricing catastrophe risk prospectively using models, requiring them to price based on historical data alone;
Barred insurers from incorporating reinsurance costs into pricing; and
Allowed consumer advocacy groups to intervene in the rate-approval process, making it hard for insurers to respond quickly to changing market conditions and driving up administration costs.
As insurers have adjusted their risk appetite to reflect these constraints, more property owners have been pushed into the California FAIR plan – the state’s property insurer of last resort. As of December 2024, the FAIR plan’s exposure was $529 billion – a 15 percent increase since September 2024 (the prior fiscal year end) and a 217 percent increase since fiscal year end 2021. In 2025, that exposure will increase further as FAIR begins offering higher commercial coverage for larger homeowners, condominium associations, homebuilders and other businesses.
Insurance Commissioner Ricardo Lara has implemented a Sustainable Insurance Strategy to alleviate these pressures. The strategy has generated positive impacts, but it continues to meet resistance from legislators and consumer groups. And, regardless of what regulators or legislators do, California homeowners’ insurance premiums will need to rise.
The Triple-I brief points out that – despite the Golden State’s many challenges – its homeowners actually enjoy below-average home and auto insurance rates as a percentage of median income. Insurance availability ultimately depends on insurers being able to charge rates that adequately reflect the full impact of increasing climate risk in the state. In a disaster-prone state like California, these artificially low premium rates are not sustainable.
“Higher rates and reduced regulatory restrictions will allow more carriers to expand their underwriting appetite, relieving the availability crisis and reliance on the FAIR plan,” said Triple-I Chief Insurance Officer Dale Porfilio.
With events like January’s devastating fires, frequent “atmospheric rivers” that bring floods and mudslides, and the ever-present threat of earthquakes – alongside the many more mundane perils California shares with its 49 sister states – premium rates that adequately reflect the full impact of these risks are essential to continued availability of private insurance.
U.S. property claims volume rose 36 percent in 2024, propelled by a 113 percent increase in catastrophe claims, according to a recent Verisk Analytics report.
While evolving climate risks fueled claim frequency, uncertain inflation trends and unchecked legal system abuse will likely further strain insurer costs and time to settle these claims, posing risks to coverage affordability and availability.
Abnormally active Atlantic hurricane season
In a “dramatic shift” from previous loss patterns, late-season hurricane activity – rather than winter storms – dictated fourth-quarter claims operations last year, Verisk reported. Hurricane-related claims comprised nearly 9 percent of total claims volume, at a staggering 1,100 percent increase from the third quarter of 2023. Flood and wind claims both also jumped by 200 percent in volume.
“This shift in risk patterns demands new approaches to risk assessment and resource planning, particularly in the Southeast, where costs increased at six times the national rate following hurricane activity,” Verisk stated. Notably, Hurricane Milton generated roughly 187,000 claims totaling $2.68 billion in replacement costs across the Southeast, with 8 percent of claims still outstanding as of the report’s release.
Another above-average hurricane season is projected for 2025 in the Atlantic basin, according to a forecast by Colorado State University’s (CSU) Department of Atmospheric Science. Led by CSU senior research scientist and Triple-I non-resident scholar Phil Klotzbach, the CSU research team forecasts 17 named storms, including nine hurricanes – four of them “major” – during the 2025 season, which begins June 1 and continues through Nov. 30. A typical Atlantic season has 14 named storms, seven hurricanes, three of them major. Major hurricanes are defined as those with wind speeds reaching Category 3, 4, or 5 on the Saffir-Simpson Hurricane Wind Scale.
Water, hail, and wind events in the Great Plains and Pacific Northwest also contributed to unexpected claim volumes, Verisk added. In contrast, wind-related claims fell in the Northeast compared to the fourth quarter of 2023.
Such regional variations highlight “the importance of granular, location-specific analysis for accurate risk assessment,” Verisk stated.
Contributing economic factors
Labor and material costs continued to rise year over year, with commercial reconstruction costs seeing a more pronounced increase of 5.5 percent compared to residential’s 4.5 percent, Verisk reported. The firm projected moderate reconstruction cost increases within both sectors during the first half of 2025.
Looming U.S. tariffs, however, may complicate this trajectory. Inflationary pressures related to the Trump Administration’s tariffs could further disrupt supply chains still recovering from natural catastrophes and the COVID-19 pandemic. Any such disruptions would compound replacement costs for U.S. auto and homeowners insurers as material costs – such as lumber, a major import from Canada – become even more expensive.
Excessive litigation trends
Similarly, excessive claims litigation – which prolongs claims disputes while driving up claim costs – plagues several of the states Verisk identified as experiencing increased claim volumes. For instance, though hurricane activity helps explain higher claim frequency in Georgia, the Peach State also is home to a personal auto claim litigation rate more than twice that of the median state, with a relative bodily injury claim frequency 60 percent higher than the U.S. average.
Verisk’s preliminary Q4 data reveals a 7 percent decrease in average claims severity compared to the same period in 2023 – a figure the firm expects to rise as more complex claims reach completion. But costly and protracted claims litigation, paired with ongoing tariff uncertainty, could magnify this figure even beyond their projections.
Undoubtedly, both will challenge insurers’ capacity to reliably predict loss trends and set fair and accurate premium rates for the foreseeable future, underscoring Verisk’s point that “staying ahead of these evolving patterns is essential in building more resilient operations in the future.”
You read that right. As a percentage of median household income, personal auto insurance premiums nationally were more affordable in 2022 (the most recent data available) than they have been since the beginning of this century.
And even the premium increases of the past two years are only expected to bring affordability back into the 2000 range, according to the Insurance Research Council (IRC).
A new IRC report – Auto Insurance Affordability: Countrywide Trends and State Comparisons – looks at the average auto insurance expenditure as a percent of median income. The measure ranges from a low of 0.93 percent in North Dakota (the most affordable state for auto insurance) to a high of 2.67 percent in Louisiana (the least affordable).
The pain is real
This is not to downplay the pain being experienced by consumers – particularly those in areas where premium rates have been rising while household income has been flat to lower. It’s just to provide perspective as to the diverse factors that come into play when discussing insurance affordability.
Between 2000 and 2022, median household income grew somewhat faster than auto insurance expenditures, causing the affordability index to decline from 1.64 percent in 2000 to 1.51 percent in 2022. In other words, auto insurance was somewhat more affordable in 2022 than in 2000.
“With the recent increases in insurance costs, affordability is projected to deteriorate in 2023 and 2024,” said Dale Porfilio, FCAS, MAAA, president of the IRC and chief insurance officer at Triple-I. “The affordability index is projected to increase to approximately 1.6 percent in 2023 and 1.7 percent in 2024, a significant increase from the low in 2021 but still below the peak of 1.9 percent in 2003.”
In other words, we’ve been here before; and, if risks and costs can be contained, so can premium growth in the long term.
Cost factors vary by state
Auto insurance affordability is largely determined by the key underlying cost drivers in each state. They include:
Accident frequency
Repair costs
Claim severity
Tendency to file injury claims
Injury claim severity
Expense index
Uninsured and underinsured motorists
Claim litigation.
These factors vary widely by state, and the IRC report looks at the profiles of each state to arrive at its affordability index.
Reducing risk and costs is key
Porfilio noted that “while state-level data cannot directly address affordability issues among traditionally underserved populations, collaborative efforts to reduce these key cost drivers can improve affordability for all consumers.”
Continued replacement-cost inflation is likely to maintain upward pressure on premium rates. Tariffs could exacerbate that trend, as well as hurting household income in areas dependent on industries likely to be affected by them.
At the same time, some states are working hard to ameliorate other factors hurting affordability. Florida, for example, was the second least affordable state for auto insurance in 2022; however, the state has made recent progress to reduce legal system abuse, a major contributor to claims costs in the Sunshine State. In 2022 and 2023, Florida passed several key reforms that have led to significant decreases in lawsuits. As a result, insurers have been writing more business in the state after a multi-year exodus. This increased competition puts downward pressure on rates, which should be reflected in the IRC’s next affordability study.
Tariffs and threats of tariffs have been roiling financial markets since January. Property and casualty insurers are no less concerned, as the cost of repairing and replacing damaged property is a driver of claim costs and, ultimately, policyholder premiums.
Triple-I Chief Economist and Data Scientist Dr. Michel Léonard recently sat down to explain the implications of tariffs and trade barriers for insurers and what economic considerations concern industry decisionmakers.
While property and casualty insurers write many kinds of coverage, the lines Léonard primarily discussed were homeowners and personal and commercial auto – “lines that have a physical emphasis on repair, rebuild, and replace.”
Lumber from Canada; cars, trucks, and parts from Canada and Mexico; and garments, furnishings, and technology from Asia all come into play when considering the prospective impacts of tariffs on replacement costs, Léonard said.
“When we’re focusing specifically on China,” he said, “we’re looking primarily at farm equipment and alternative-energy components.”
Uncertainty around tariffs – particularly in recent weeks, as tariffs on Mexico and Canada have been imposed and “paused” – makes analysis even more difficult.
“Much depends on how much clarity there is, how much communication from the policymakers, from the administration and from the legislature,” Léonard said. It’s also important to remember that impacts can last well beyond their implementation and withdrawal.
During the first Trump Administration, tariffs on soft commodities, beef, grain, and so forth had impacts for several years afterwards.
“Those tariffs were fairly short lived,” Léonard said, “but for two to three years afterward farmers were uncomfortable investing in equipment at the same pace, and that reduced farmowners’ insurance growth.”
Regardless of how the current discussions around tariffs play out, the Trump Administration has signaled a decided shift in policy toward greater protectionism. As a result, Léonard said, “We should expect a repositioning in our understanding of our replacement costs and underlying growth forecast for the next 12 months, at a minimum.”
He projects a period of “most likely 24 to 36 months” in which growth will be slower and inflation – including replacement costs for the P&C industry – will be higher.
Florida’s legislative reforms to address claim fraud and legal system abuse are stabilizing the state’s property/casualty insurance market, according to the latest Triple-I Issues Brief.
Claims-related litigation has significantly declined over the past two years, and premium averages are nearly flat, with several insurers requesting rate decreases from the state’s insurance regulator. In addition, the brief says, the number of insurers writing business in the state has rebounded after a multi-year exodus. This competition from the private market has allowed policyholders to leave Citizens Property Insurance Corp. – the state-run insurer of last resort – to obtain coverage at previously unavailable rates from a much healthier private market.
According to the state’s Office of Insurance Regulation (OIR), Florida in 2022 accounted for nearly 71 percent of the nation’s homeowners claim-related litigation, despite representing only 15 percent of homeowners insurance claims. The same year – before Hurricane Ian made landfall in Florida – six insurers in the state declared insolvency, primarily due to economic pressures from legal system abuse. Based on insured losses, Ian became the second-most costly U.S. hurricane on record, due in large part to extraordinary litigation costs for disputed claims.
The Legislature responded to the growing crisis by passing several pieces of insurance reform that, among other things, eliminated one-way attorney fees and assignment of benefits (AOB) for property insurance claims and prohibited misleading legal service ads and the misuse of consumer health information for legal services.
Premium rate growth slowing
The impact of the 2022 and 2023 reforms can be seen in premium rate changes, particularly with respect to homeowners insurance. Homeowners rates in Florida grew at a much slower rate in 2024, even as rate growth remained strong nationally. Growth in personal auto insurance premium rates in Florida has slowed since the repeal of AOB and one-way attorney fees, but the trend also is consistent with nationwide experience.
“There are a lot of factors involved in insurance rates, and Florida’s property and auto markets are challenging,” Florida Governor Ron DeSantis said in February, “but…data suggests that, in 2024, Florida had the lowest average homeowners’ premium increases in the nation, and the overall market has stabilized, with 11 new companies having entered the market over the past two years.”
Among the top 10 national insurers writing homeowners insurance in Florida, 60 percent have expanded their business over the past year, and 40 percent of all insurers operating in the state filed for rate decreases in 2024, according to Florida Insurance Commissioner Michael Yaworksy.
The cost of reinsurance also continues to decrease for Florida carriers.
“In 2024, most companies paid less for reinsurance than they did in 2023,” according to the OIR website. “The average risk-adjusted cost for 2024 was -0.7 percent, a large reduction from last year’s change of 27 percent increase from the prior year.”
Reinsurance costs are factored into premium rates, so this is another reason Florida now has the lowest average rate filings in the United States in 2024, according to S&P Global Marketplace.
Triple-I expects the pace of increase in average property/casualty insurance replacement costs to exceed increases in the consumer price index in 2025 and beyond as auto replacement costs rise for the first time since 2022 and CPI continues to decline.
Triple-I’s replacement cost index for personal and commercial auto tracks changes in the price of vehicles, parts, and equipment that make up the replacement costs facing insurance carriers providing collision insurance for both personal and commercial motor vehicles. These costs – which have increased by as much as 30 percent over the past five years – are expected to increase by 2.8 percent in 2025.
The index combines replacement costs data for motor vehicles by age and for parts and equipment from the CPI for All Urban Consumers. These cost drivers were chosen from a wider selection of U.S. government sources, including the Bureau of Labor Statistics, Bureau of Economic Analysis, Federal Reserve, Census Bureau, and the Departments of Labor, Transportation, and Energy.
“While we expect the economic drivers of P/C insurance performance to continue improving 2025, performance will be constrained by replacement cost increases, rising natural catastrophe losses, and geopolitical uncertainty,” said Triple-I Chief Economist Dr. Michel Léonard.
