Florida Retracts $2.1 Billion from Insurer Reinsurance Support Amid Lower Claims

Florida lawmakers initially allocated $3 billion in state funds to support property insurers through reinsurance assistance programs created during 2022 special legislative sessions. These programs were designed to bolster insurers' ability to cover hurricane-related claims, a critical factor influencing homeowner and business insurance premiums in the state. Reinsurance is essential in Florida's insurance landscape, supplementing the state's Hurricane Catastrophe Fund and helping insurers manage catastrophic risks.

Governor Ron DeSantis signed a bill (HB 5013) that reverses most of this allocation, allowing $2.1 billion of the funds to remain with the state for other uses or savings. This legislative move followed projections that much of the initially set aside funds would remain unused due to lower-than-expected claims.

The Reinsurance to Assist Policyholders (RAP) program, backed by $2 billion of state general revenue, provided reinsurance coverage retroactively for storms occurring over a two-year period starting in 2022. Losses from Hurricane Ian, which struck Southwest Florida in September 2022, accounted for nearly all the claims paid out under RAP. Insurers had received approximately $740.6 million from RAP for Ian-related losses by the end of 2024, with ultimate costs expected not to exceed $860 million. This has led to a pullback of $1.1 billion initially reserved for RAP.

Another program, the Florida Optional Reinsurance Assistance program, was funded with $1 billion to offer reinsurance for the 2023 hurricane season. Although five insurers participated, the program did not incur significant losses from Hurricane Idalia, leading all participating companies to end their contracts and returning the full $1 billion to the state's general revenue.

The reconsideration and withdrawal of these funds reflect evolving assessments of the state's insurance market stability and the actual impact of recent hurricanes on insurers' reinsurance needs. This legislative adjustment may affect the availability and structure of reinsurance support in Florida, with implications for insurance premium dynamics and market resilience to future catastrophic events.