Southeast
This NOAA Geostationary Operational Environmental Satellite (GOES) image shows hurricane Floyd just off the Florida coast on September 14, 1999. Image by Marit Jentoft-Nilsen, NASA GSFC Visualization Analysis Lab

FL - 'Hurricane tax' could boost Floridians' property insurance by $300 each a year

Ballooning reinsurance costs, “loss creep” from 2017-18 hurricanes, coastal flooding and excessive litigation costs are among converging “perfect storm” factors that are hiking Florida property insurance renewal rates by 30% to 40%.

According to a 12-page analysis by the R Street Institute published last week, a provision of President Joe Biden’s proposed ‘Made in America Tax Plan’ (*MATP) being debated in Congress could add to that increasingly expensive pain for all 6.5 million Florida residential and commercial property owners.

R Street Institute, a Washington-based nonpartisan research nonprofit, projects that under Biden’s plan, property insurance costs would increase nationwide by $10.8 billion to $20.3 billion a year.

In Florida, R Street forecasts property insurance costs would increase between $864 million and $1.62 billion a year and cost $170 to $319 per property annually.

The MATP increases the corporate tax rate from 21% to 28% and implements a global minimum tax (GMT) regime with proposed rates from 15% to 28% on international reinsurers.

“The first rule will directly increase the cost of providing insurance by increasing the tax burden on U.S. insurers. The second provision will increase the cost of insurance indirectly, by increasing the tax expenses of international reinsurance companies, which provide much of the capital for U.S. risks and are often located in low-tax jurisdictions,” the analysis states.

Florida’s insurance structure is based on “reinsurance,” essentially insurance for insurers because large corporate insurers abandoned the state following the 2004-05 hurricane seasons.

The approximately 60 independent private insurers operating in Florida are thinly capitalized. Many rely on private capital from overseas hedge funds and other sources – or “reinsurance” – that essentially gamble against hurricanes.

After a decade without a landfall hurricane, 2017’s Hurricane Irma caused $17 billion in damage and 2018’s Hurricane Michael $12 billion, ending an era of “soft pricing.”

Because Florida allows claims to be filed three years after an event, reinsurers are hedging bets by requesting carriers raise rates between 25-to-45% to account for “loss creep” from 2017-18 storms.

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