Why are property insurance companies leaving Florida?
Property insurance has skyrocketed these last few years in Florida. Some insurance companies have also decided to leave Florida altogether. In this blog, we will be talking about some insights as to why property insurance companies have been leaving Florida.
Florida is known for its vulnerability to hurricanes and tropical storms. These natural disasters can cause significant damage to properties and lead to substantial insurance claims. Insurance companies might be concerned about the potential of high volume of claims resulting from such events, which could impact their financial stability.
Reinsurance premiums can increase quite quickly. Reinsurance is a technique used by insurance firms to share their own risk with other companies, thereby reducing it. Reinsurance prices can rise dramatically following particularly catastrophic occurrences, which could result in increased expenses for insurance providers. As we observed with Hurricane Ian in September 2022, if Florida is subjected to frequent and severe natural disasters, it may raise reinsurance prices and have an adverse effect on insurance company profitability.
Another reason is concerns about profitability. Insurance firms may struggle to stay profitable if the frequency and severity of natural catastrophes result in a high volume of claims. Companies may decide to restrict their risk in such circumstances by lowering the number of policies they underwrite or perhaps exiting the market entirely, as is the case at the moment.
As insurance claims rise, companies adjust their premiums to reflect the increased risk, which is what we see happening. This makes insurance less affordable for property owners, which in turn can lead to decreased demand in property value. Some owners are selling because of this large increase in operating expenses. Other property owners are rolling the dice and not insuring their building at all.
All of these factors are possible reasons as to why insurance rates are going up and the reason why we are seeing more than 30 insurance providers leave the state of Florida. These new changes in policy have to be taken into consideration when underwriting apartment complexes we are looking to purchase.
If you or anyone you know is looking to sell their multifamily property, please do not hesitate to reach out to us. We are looking for our next project!