Florida’s property insurance industry has received some very good news. AM Best reports that Florida domestic property insurers generated nearly $1 billion in underwriting gains during 2025, compared with a $132 million underwriting loss only two years earlier. Litigation expenses have fallen dramatically, carrier balance sheets have improved, reinsurance pricing is softening, new companies are entering the market, and Citizens Property Insurance Corporation has shed hundreds of thousands of policies.
Pop the champagne! Just be careful not to spill it near any insured property which may contain a limited water damage endorsement.
The insurance industry’s message is that Florida’s reforms are working. From the perspective of insurers, reinsurers, investors, managing general agents, and their insurance lobbyists who make money arranging all of this, that may be entirely correct. The Florida insurance patient has been declared stable.
The problem is that many Florida policyholders are still sitting in the emergency room, wondering when anyone will examine them.
Homeowners continue to pay historically high premiums while accepting hurricane deductibles that can leave them responsible for tens of thousands of dollars before their insurance company pays anything. Many policies now provide less coverage than the policies they replaced. Matching protection may be restricted by endorsements limiting what insurers will pay to replace undamaged materials. Water losses can be capped at $10,000. Many surplus lines policies require Florida policyholders with Florida losses involving Florida property to pursue litigation in distant states selected by the insurer. Citizens itself confirms that certain nonweather water losses are subject to a $10,000 limit when the policyholder does not participate in its managed repair program.
This produces an unusual definition of a successful insurance marketplace. Premiums, while stable or declining slightly, remain high. Deductibles remain high. Coverage is narrower. Remedies for wrongful claims conduct are now much weaker. But the companies selling the policies are doing much better.
It reminds me of the old joke about the medical operation being a complete success, except for the patient’s recovery.
There is nothing wrong with insurers earning a fair profit. Insurance companies must remain solvent, attract capital, purchase reinsurance, pay claims, and prepare for catastrophes. Nobody representing policyholders should want financially weak insurers. Insolvent insurers do not pay claims particularly well. But financial stability should not become a slogan used to avoid the more important question about what policyholders receive in return. Insurance was not invented to help insurance company investors.
A policyholder does not purchase an insurance company’s combined ratio. A homeowner cannot patch a roof with statutory surplus. The policyholder buys a promise that, after disaster strikes, the insurer will promptly investigate the loss and pay what the policy reasonably provides. When that promise is surrounded by high deductibles, strategic sublimits on important perils, matching restrictions, managed repair requirements, broadly worded exclusions, shortened deadlines, expensive appraisal provisions, arbitration requirements, and distant forum dispute clauses, the customer may reasonably wonder whether the product has become more packaging than protection.
The discussion about managing general agents and captives makes that question even more important. The recent AM Best video briefing emphasized the dramatic improvement in carrier surplus and underwriting performance. Follow-up reporting also noted that the financial results of affiliated MGAs, third-party administrators, and reinsurance captives are not necessarily reflected in the admitted insurer’s statutory surplus. Some captive reinsurers are also assuming portions of the carriers’ retained risk.
MGAs and captives are not inherently improper. A good MGA can provide underwriting expertise, technology, administration, and operational efficiency. A legitimate captive can retain real insurance risk, reduce dependence on outside reinsurance, and align the owners’ interests with sound underwriting. The question is not whether these entities should exist. The question is whether their financial arrangements are transparent, reasonable, conducted at arm’s length, and ultimately protective of the insurer’s ability to pay policyholder claims. Indeed, insurer profits seem to be much higher than reported when including these not-at-arm’s-length companies in the financial equation.
Florida’s own commissioned affiliate study should have triggered that investigation years ago. The study examined 53 insurers and found that 41 used an MGA or attorney-in-fact to administer policy or claim operations. Excluding certain national-company outliers, the insurers collectively showed hundreds of millions of dollars in losses while their affiliates reported approximately $1.8 billion in income. The report concluded that 19 single-state or regional insurer fee structures were “not fair and reasonable,” with another five undetermined because complete information had not been provided. MGA compensation ranged from 20% to 34% of premium, while total affiliated fees in some arrangements reached as high as 63% of premium.
The report went even further. It stated that most single-state and regional insurers appeared to use MGAs as a revenue stream for the holding company. It warned that MGA fee structures could be used to circumvent dividend restrictions. It recommended annual reviews, updated MGA agreements, limited-scope examinations, coordinated financial examinations of affiliated entities, and closer review of the flow of money among insurers and their affiliates.
Then the report disappeared into the regulatory equivalent of a Florida sinkhole. The AM Best video raised this issue, which I assume it did because it seems Florida is unique with this cozy third-party arrangement. I noted this in Florida’s Insurance Regulator Buried a Completed Report That Raised Red Flags About Insurer Affiliate Profits. It is not just me saying this. The consultant who prepared it later testified that the work was complete, that she repeatedly followed up with the Office of Insurance Regulation, that no additional work was requested, and that her invoice was paid in full. Lawmakers were not given the report while they debated sweeping insurance reforms based largely on the proposition that insurers were losing money because of litigation, fraud, roof claims, public adjusters, contractors, attorneys, and apparently every other person in Florida except those receiving affiliate fees.
Florida House leaders later promised an investigation using forensic accountants. In 2026, the House passed HB 1399 by a vote of 106 to 3. The bill would have required insurers to prove that payments to affiliates were fair and reasonable, allowed regulators to consider affiliate profits during rate reviews, required affiliate registration, and authorized the return of improper payments.
The Senate allowed it to die in the Rules Committee. Its companion bill also died.
Apparently, investigating policyholders and their lawyers requires emergency legislation. Investigating billions of dollars flowing among insurer affiliates requires more study, additional consideration, and perhaps a very long lunch.
This is why many Floridians remain skeptical when told the market has been fixed. They were promised that eliminating policyholder attorney’s fees and restricting lawsuits would produce lower costs and a healthier market. The healthier market has arrived for insurers. The policyholder benefits remain harder to locate.
Maybe eventually premiums will materially fall. Maybe competition and lower reinsurance costs will produce meaningful savings. Maybe stronger insurers will pay claims more fairly because they no longer feel financially threatened.
I hope so. But hope is not regulation, and a press release is not an insurance policy.
As August begins, Florida is entering the dangerous heart of hurricane season. The National Hurricane Center says most Atlantic activity occurs from mid-August through mid-October, with the climatological peak occurring around September 10. Florida has built a much healthier and profitable insurance system ready for any hurricane catastrophe. The big question is whether it has been built to fully and promptly pay losses or merely created a more profitable system for collecting premiums while paying less.
The Florida insurance industry may celebrate its recovery at much nicer resorts. Policyholders should read their policies and demand more from regulators and politicians who are supposed to level the playing field.
For those more interested, the AM Best video that launched these observations can be found here.
Thought For The Day
“Price is what you pay. Value is what you get.”
—Warren Buffett
