Florida’s insurers are profitable after 7 straight years of losses—but it’s mostly because of dumb luck

Insuring homes in Florida has become a tough business. The state’s population has continued to rise in recent years, even as frequent and more devastating hurricanes cause billions in property damages: insurers’ underwriting losses cost them $1.8 billion in 2022, and $1.52 billion in 2021.

Last year, though, was a bright spot in what’s become a concerning downward trend, according to a new report from S&P Global Market Intelligence. In 2023, Florida’s property insurers turned a profit of almost $150 million, helped by a less-deadly hurricane season, strong returns on investment portfolios and new insurer-friendly laws. 

“Florida is one of those feast or famine states when it comes to property insurance losses,” S&P Global Market Intelligence analyst Tim Zawacki told Fortune. “The wind blew the right way last year.”

Florida homeowners have been facing skyrocketing insurance costs in recent years, as increased hurricane risk and a shrinking pool of private insurers have pushed rates up. Citizens Property Insurance Corp., a taxpayer-owned “insurer of last resort” created in 2002, has picked up the slack. After posting meager gains in the early 2010s, Citizens and the remaining private insurers started losing money in 2017, and the three-year stretch between 2020 and 2022 cost them upward of $3 billion in losses. The market has suffered: nine residential property insurers went under or merged with their competitors between 2021 and 2023.

“Citizens is the public entity that, you know, the larger it gets, the more risk that is out there for all insurance customers in Florida, regardless of who their carrier is,” said Zawacki. Because Citizens is owned by taxpayers, taxpayers are ultimately on the hook for any losses Citizens incurs that exceed its reserves. “There has been encouragement by the state to bring in new private carriers.”

Last year’s positive returns are helping to do just that—reversing the trend in recent years, Florida regulators approved six new property insurers to start writing policies in 2024. The state also recently passed two insurer-friendly  laws that will make it easier to operate in the state: one law helps disincentivize citizens from making frivolous insurance claims, and another helps prevent customers from assigning their insurance benefits to other people, such as contractors.

“The industry is on a much firmer footing today than it was prior to [the latter law] being passed,” Zawacki said. “If you look back in terms of what have been the drivers of higher losses in the Florida market, major hurricanes are obviously a big driver. But also, fallout from the litigated claims following a weather event has been a significant issue.”

The three largest counties in South Florida—Miami-Dade, Broward, and Palm Beach—are some of the state’s most densely populated, and are also some of the most vulnerable to hurricanes. Taxpayer-owned Citizens writes a much higher proportion of the policies in those three counties than any private insurer. Zawacki pointed out that diversity within the Florida market can create attractive opportunities for private insurers less willing to take risks. 

“Florida’s a very large and diverse state in terms of geography and catastrophe risk. The Tri-County area down in South Florida is a very different area than, you know, say some of the areas on the Gulf Coast or up in the panhandle,” Zawacki said. “Companies can come in and maybe focus on specific attractive segments that may be lower risk.”

One year of positive returns doesn’t change the broader, worrying trends in Florida’s property insurance market. New legislation and tentative willingness from private insurers to step in are positive signs, but experts agree that the state is likely too heavily reliant on Citizens, and a healthy market requires that more private insurers pick up the slack across the state.

“The industry is in a much better place, but that doesn’t necessarily mean that it’s in a good place,” Zawacki said. “There needs to be more private investment in the market.”