Florida domestic residential property insurers' income in 2023 moved into positive territory for the first time in seven years.
Thanks to a significant swing in investment income and much improved underwriting results, the group of around 50 insurers reported $147.3 million in net income for 2023, according to an analysis conducted by S&P Global Market Intelligence. The group excluded state-owned Citizens Property Insurance Corp.. That compares to net losses of more than $1 billion in each of the previous two years.
Florida property insurers benefited from a mild hurricane season and a meaningful increase in investment income in 2023. While the industry still recorded an underwriting loss, it was much narrower than in recent years, and there are early signs that recent legislative reforms will benefit the troubled market.
Citizens reported during its December Board of Governors meeting that new non-catastrophe litigated cases being filed through July 2023 were down 20% when compared to the prior year. Full-year 2023 results show incurred defense and cost containment expenses for the insurance industry were $739.2 million within the three property lines of business: homeowners, fire and allied lines. That was the lowest such yearly total since 2019 when the incurred defense expenses were $637.1 million.
Aside from Citizens, the group reported $346.5 million in investment income in 2023, which was more than the prior two years combined.
On the underwriting side of the ledger, the industry posted collective losses of $190.8 million in 2023. Though that marked the eighth-straight year of underwriting losses for Florida insurers, it was considerably better than losses of almost $1.80 billion in 2022 and $1.52 billion in 2021.
The reporting periods for this analysis may not include the same number of insurers, as nine Florida residential property insurers have become insolvent or merged into other companies since 2021, while new ones have entered the market. Excluding subsidiaries that are no longer in business, net losses for the group of companies were $1.16 billion in 2022 and roughly $650.0 million for 2021.
Tort reform impact
Florida property insurers are optimistic about the long term benefits of tort reform measures that went into effect in March 2023.
Universal Insurance Holdings Inc. is seeing a lot of positive development in the wake of those reforms, according to CEO Stephen Donaghy, who during a third-quarter 2023 earnings call, said future rate reductions in the Sunshine State may be possible.
Signs of the legislation impact can be seen within the full-year 2023 results, specifically in defense and cost containment expense, which can reflect the insurers' costs to litigate claims. Collectively, the industry reported direct incurred defense expense of $739.2 million in Florida, pushing the industry’s DCCE ratio to 3.1% for the year. That was the lowest yearly defense expense total since 2019, when the state was left untouched by hurricanes.
The industry reported incurred defense expenses of $637.1 million that year, which translated to a DCCE ratio of 4.7%. A direct comparison to the prior year would be difficult as the impact from Hurricane Ian contributed to the $1.60 billion in incurred defense costs for the industry in 2022. While there was a substantial year-over-year decrease in the amount of incurred defenses costs in Florida, the dollar amount still remains far and away the highest across the nation. The incurred defense cost for the industry were $401.6 million in California, followed by $284.7 million in Texas.
The bulk of the incurred defense costs in Florida came within the homeowners business line, with expenses of $593.5 million in 2023 compared to $1.23 billion in 2022 and $527.1 million in 2019, translating to DCCE ratios of 3.8%, 9.4% and 5.4%, respectively.
Citizens' growth continues
Citizens, the state-backed insurer of last resort, once again reported considerable premium growth. The insurer recorded total direct premiums written of $5.07 billion in 2023, up 59% from 2022. Almost two thirds of its 2023 premiums were within the homeowners line of business. Citizens posted net income of $746.5 million in the most recent full year, compared to a loss of $2.24 billion in 2022.
The state's largest residential property insurer began 2023 with roughly 1.16 million in-force policies, peaking at 1.41 million at the end of September. The insurer's efforts to move policyholders to private insurers contributed to policy counts falling to 1.23 million by the end of the year. The Florida Office of Insurance Regulation said that it had approved insurers to assume 650,399 policies from Citizens in 2023, an increase of 800% from the previous year.
Of the state's 22 largest private domestic residential property insurers, 18 posted a profit in 2023 compared to 10 in the prior year.
More competition coming online
Florida's insurance regulator approved six property and casualty insurers to start writing residential property insurance business in 2024. Two of the entities, Condo Owners Reciprocal Exchange and Tailrow Insurance Co., are units of HCI Group Inc. The other companies are Orange Insurance Exchange based out of Jonesville, Fla.; Hippo Holdings Inc.'s Mainsail Insurance Co. unit based in Texas; and subsidiaries of Onion180 Group: Orion180 Insurance Co. and Orion180 Select Insurance Co.