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Florida Gov. Ron DeSantis last week put his signature on House Bill 5013, which ends one state-backed level of reinsurance and slashes another one, a move that could perhaps create a little more demand for private reinsurance coverage in the state.

The law, which took effect immediately upon the governor’s signing, pulls back on programs that were introduced in 2022 to help Florida property insurers facing spiraling claims defense costs and spiking reinsurance rates.

As the market has stabilized, and as reinsurance costs have dropped and capacity has increased, the need for the state programs has diminished. The new law reduces funding available to reimburse insurers under the Reinsurance to Assist Policyholders (RAP) program, from $2 billion to $900 million. It also repeals the Florida Optional Reinsurance Assistance (FORA) program altogether, saving the state general fund more than $2 billion in potential expenditures.

A few insurers have said the RAP program was helpful and produced savings for policyholders. Others have argued that the RAP fund did not go far enough to provide much relief on reinsurance costs, and FORA was too expensive and didn’t offer the level of coverage at the bottom of the reinsurance tower, where most carriers needed it.

Few carriers took advantage of the voluntary FORA program. By mid-2023, only six companies had signed up for it. One of those, Cypress Property & Casualty Insurance, was disqualified for lack of premium payments, according to the State Board of Administration, which managed the program.

By the end of 2024, no transfers had been made for the FORA program, a legislative analysis of SB 5013 noted.

Most carriers were required to participate in the RAP fund, and savings had to be passed on to insureds. After Hurricane Ian in 2022, some 48 insurers were reimbursed more than $740 million from the program, the bill analysis explained.

“Both programs were always intended to be temporary programs, so this is probably a cleanup of that,” said Melissa Burt DeVriese, president of Security First Insurance, based in Ormond Beach.

She noted that the RAP fund was, in fact, a significant help for Security First during the height of the insurance crisis, producing some $5 million in savings that were passed on to consumers. “If it saved $5 million for us, then, statewide, I would imagine it was $300 million or more that was passed on to consumers,” she noted.

The reduction in RAP and the elimination of FORA, however, has had little impact on most insurers’ private reinsurance purchases this year, DeVriese said. A better approach by lawmakers would be to lower the retention level and reduce the cash build-up requirements for the Cat Fund, the Florida Hurricane Catastrophe Fund, said Locke Burt, chairman and CEO of Security First. The Cat Fund provides a type of state-backed reinsurance at lower prices than private reinsurers offer, but it covers only part of the reinsurance needs for most insurers.

Related: Florida Reinsurance Buyers Found Ample Capacity at Mid-Year Renewals

Topics Reinsurance