If Florida’s insurance market needed more indication that 2022 legislative reforms have made a big difference in the cost of doing business in the state, one of the biggest names in reinsurance has provided it.
“Clearly, it is time for both carriers and reinsurers that might have stayed on the sidelines in recent years to take a fresh look at this market, if they have not done so already,” reads a recent report from Gallagher Re, one of the largest reinsurance brokers and frequent analyzer of insurance market data.
The report takes a dive into how Florida found itself as the claims litigation capital of the nation, explores legislative and court-decision history that has seldom been explained, and looks at what has happened in the last three years to bring the state’s property insurance industry back from the brink.
“The impact of the reform is now being recognized by reinsurers, as the recent June 1 renewals brought the first significant rate decrease in several years. This will help continue to stabilize primary market rates or even decrease them moving forward,” notes the report, titled, “.”
The trouble began more than a century ago, the Gallagher authors said. While most states’ court systems expected each side in a lawsuit to pay their own attorney fees, Florida lawmakers in 1893 attempted to “level the playing field” in insurance disputes, requiring courts to award attorney fees to policyholders who succeed against their insurers — but not vice versa.
By the mid-2000s, the claims litigation field had become lopsided in favor of claimants’ lawyers, the report explained. A famous 2017 Florida Supreme Court decision (known as Joyce vs. FedNat) paved the way for fee multipliers, allowing plaintiffs’ attorneys to sometimes win hundreds of thousands of dollars in fees on a five-figure claim.
And don’t forget the significant impact that assignment-of-benefits agreements had on claims escalation and litigation, Gallagher said. Court decisions between 1971 and 2008 confirmed that AOBs could cover attorney fees.
According to one insurer in a 2015 court filing, a typical scenario would involve a contractor requiring homeowners to sign an AOB before beginning any repair work, the report said. “Subsequently, the contractor would submit a bill to the insurer ‘that was, on average, 30% higher than comparative estimates from vendors without an AOB.'”
By 2022, with homeowners’ premiums soaring by more than 45% in just a few years, and multiple Florida insurance carriers becoming insolvent, the Legislature and the governor listened to the industry and took action. Those 2022 and 2023 reforms eliminated one-way attorney fees, barred AOBs in new policies, tightened rules for bringing bad-faith claims, and followed up with broader tort-reform measures.
Now, those historic changes are truly paying off, Gallagher Re said. The number of claims lawsuits against carriers has dropped to 2018 levels. Insurers’ defense and cost containment expenses, a measure of legal costs, in 2024 dropped to 3.4%, the lowest ratio since 2015 and a third of the peak cost seen in 2022, the report said, citing data from state regulators.
Loss ratios for Florida insurers in 2024 dropped below the U.S. average. The average combined ratio for Florida carriers dropped below 100% for the first time since 2015. In 2024 Florida’s domestic property companies turned a clear collective profit, despite a $20 billion insurance loss from Hurricane Milton, according to Gallagher Re’s analysis of data from S&P Global.
“In short, the reforms have led to a significant drop in property claims lawsuits, better loss ratios and profitability for insurers and a reversal of the exodus of carriers from the Florida market,” the report’s authors wrote.
Also, as regulators have noted in recent months, some 14 new companies have entered the Sunshine State, and policy count and exposure for the state-created Citizens Property Insurance Corp. have dropped sharply.
And reinsurance prices have fallen. Decreases were achieved across all layers — ranging from an average decrease of 9% on lower layers to 12% on mid layers and up to 20% on upper layers, the report found.
Other states have taken notice and have instituted their own litigation reforms modeled on Florida’s changes.
The Gallagher Re report can be seen .
Topics Florida A.J. Gallagher
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