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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 14 September 2024 S P O N S O R E D C O N T E N T STATE INSURANCE REFORMS AIM TO ALLEVIATE MARKET CHALLENGES B y J O H N R O H R B AC H L ast year, National General Lend- er Services published an article highlighting that secondary perils, such as severe convective storms, wildfires, and river floods, are significantly impacting the insurance industry. 1 The trend continues into this year, as the United States recorded 13 separate billion-dollar insured thunder- storm outbreaks in the first half of 2024, eight of which topped $2 billion. 2 The impact of these losses, along with infla- tion and rising reinsurance costs, creates challenges for homeowner insurance affordability and availability in many parts of the United States. The outlook isn't entirely grim. Fol- lowing several years of substantial losses for property and casualty insurers, there has been notable progress in resilience efforts, actuarially sound rating, and un- derwriting discipline. This progress en- ables them to continue offering coverage in difficult markets. Additionally, current and proposed state-level legislative solu- tions are beginning to yield positive re- sults. Examining well-known insurance markets like Florida and California, as well as a less familiar one like Oklahoma, offers a view into how these adjustments are performing so far. Florida A fter a relatively calm year for catastrophes in 2023, reinsurance capacity and rate stability are becoming more manageable. Coupled with reforms in the state's insurance code, the Florida insurance market is moving toward a more stable foundation. The most significant change to the insurance code is Senate Bill 2A, signed into law in December 2022. 3 The intention of the law was to ensure policyholders have access to quality, affordable private market property in- surance. Changes included reducing the incentive to litigate, lessening incentives for contractors to charge for unnecessary expenses, clarifying uncertainty when establishing a breach of an insurance policy, encouraging more prompt claim filings, and increasing the eligibility threshold to participate in its state-run insurer of last resort, Citizens Property Insurance Corp. Michael Yaworsky, Com- missioner of Florida's Office of Insurance Regulation, notes that "we (Florida) were heading in a very bad direction for al- most a decade." Further, "We finally got some reforms to bring a lot of the excess under control. And it's going to take time for consumers to feel that turning of the aircraft carrier." 4 In addition, the My Safe Florida Home Program has been re-enacted to help homeowners mitigate hurricane damage to their homes. The program provides the ability to obtain free home inspections to identify storm mitigation measures. It also provides grants to retrofit homes for storm resilience, which helps decrease the cost of homeowner insurance. 5 California T he California Department of Insur- ance has been involved in a multi- year review of the insurance conditions in the state, resulting in the Sustainable Insurance Strategy—which continues to roll out adjustments to the state's practic- es. 6 These changes include more timely review periods for needed rate/rule and form adjustments by insurers, the use of new catastrophe modeling that also requires insurers to write more policies in distressed areas, and modernization of the California FAIR Plan Association, the state's insurer of last resort. Insurance Commissioner Ricardo Lara noted that, "Ultimately, we want to reduce the number of homeowners and businesses on the FAIR Plan by strength- ening the market overall. Requiring the FAIR Plan to take concrete steps to pro- tect policyholders in an extreme disaster will keep it an effective safety net for J O H N R O H R B A C H is Executive Director, Product at National General Lender Services, a leading provider of lender-placed insurance and services in the industry. A proud member of the Allstate family of companies, they provide their clients with award- winning customer care and technology while ensuring continual compliance with ever-changing regulations and requirements.