Insurance Companies Paving Their Way in a Risky State

Florida’s insurance regulator has welcomed a wave of new startups into the state’s market. However, seasoned industry executives understand the risks these newcomers pose.

Startups often enter Florida too hastily, failing to understand the risk involved. Insurance companies often lack the financial strength to withstand catastrophic claims, such as the $25 billion in losses from Hurricane Milton.

The dangers of small size and concentrated risk are real. Between 2021 and 2022, 10 insurance carriers failed, but this isn’t stopping insurance startups from making their way into the challenging Florida market. A dozen new startups have quickly acquired more than 800,000 insurance policies, but when these businesses end up failing, this poses a huge financial burden to businesses and consumers

Over the past five years, commercial insurance rates have surged by as much as 125%, with costs expected to remain high. A major challenge is reinsurance, which enables insurers to absorb catastrophic losses. Florida’s high-risk profile makes securing adequate reinsurance difficult for startups. And if you can’t secure reinsurance, you can’t survive as an insurance company.

Higher reinsurance costs have also discouraged large national carriers from returning to Florida. Because of this, Florida’s insurance market has increasingly relied on smaller, regional carriers in the past decade. The trend especially accelerated between 2020 and 2022.

Between 2022 and 2024, eight of Florida’s 10 fastest-growing insurers were newly formed or newly licensed. Slide Insurance has been the most aggressive. Since its founding in 2022, the company has grown to become Florida’s fifth-largest private insurer, with nearly 200,000 of its 273,000 policies originating from Citizens Property Insurance Corp.

However, most startups struggle to gain significant market share. Aside from Universal Property Insurance Corp. and State Farm — each holding about 8% of the market — no other insurer has more than 5% of policies statewide.

While the small size of these companies is the main issue, an underestimation of reserve funds has compounded the problem. In 2023, actual claims exceeded initial estimates by nearly $400 million. Many newcomers underestimate Florida’s risk, causing them to leave the state or go under.

Hurricanes remain the primary causes of insurance issues. Over the past 20 years, Florida has seen weather events exceeding $57 billion. Total losses have exceeded $1 trillion in just the past seven years.

Despite a brutal hurricane season, Florida’s insurance market is expected to post its first profitable year in more than 15 years. But with the next hurricane season just several months away, the true test of Florida’s evolving insurance landscape is yet to come.

Learn More About Business Startups

 Entrepreneurs have a hard enough time as it is starting a business and helping it grow. An insurance startup faces a lot more risks.

Get the help your business needs by contacting Orlando business startup lawyer B.F. Godfrey from Godfrey Legal. There are many legal issues to contend with, so let us ensure everything goes smoothly. To schedule a consultation, fill out the online form or give us a call at (407) 890-0023.

Source:

bizjournals.com/tampabay/news/2025/02/07/new-risks-for-floridas-fragile-insurance-market.html