Florida’s insurance industry a big contributor to state economy
Its status as a low-lying peninsula jutting 500 miles into the warmest, most hurricane-active waters in the world makes Florida one of the riskiest places to live. So it comes as no surprise that the cost to insure properties in Florida does not come very cheap. Which, by extension, does not make insurance the most popular of industries among Floridians.
However, a recent study published by the Florida Office of Insurance Regulation sheds light on the positive impact the insurance industry has on Florida’s economy.
Every year, Florida law requires the OIR to produce a report describing the state of Florida’s insurance market for the previous year. The office found that, in 2012, the insurance industry provided billions in compensation to thousands of employees, and by extension, to the Florida economy. Specifically, it found that:
- Insurance-related entities provided more than 193,000 jobs, which amounts to almost 2 percent of all jobs in Florida;
- Florida insurance industry employees received almost $12 billion in total compensation, comprising roughly 2.8 percent of statewide compensation;
- The insurance industry in Florida generated almost $20 billion in total economic output, or roughly 2.5 percent of the gross state product; and
- Premium taxes paid by insurance companies totaled almost $705 billion to the state’s general revenues in Fiscal Year 2012.
The report also found the insurance market in Florida experienced steady growth and further stabilization, especially in regards to the property insurance sector. Florida domestic companies continued their growth, including expansion into other states.
Citizens Property Insurance Corp.’s share of the market decreased to 21.1 percent as of Dec. 31, 2012, from 23.6 percent the previous year, largely due to the gradual unfreezing of Citizens’ rates (10 percent “glidepath”) as well as takeout initiatives pursued by Citizens. Next year’s report should reflect an even greater scale-down of Citizens’ market share, due to implementation of the Citizens Clearinghouse and a number of successful take-outs.
Indeed, Florida’s property insurance system has experienced a degree of much-needed stabilization thanks in part to responsible legislation that has attempted to undo some of the ill-conceived reforms enacted in 2007 that largely distorted the market, undermined competition and foisted an enormous amount of risk from the private market onto taxpayers. Coupled with a historic drop in the cost of private reinsurance and Florida’s unprecedented eight years without a hurricane strike, Florida appears to be in its best position in years to absorb the economic impact of a major storm.
Nevertheless, the Legislature can and should do more to ensure that Florida and its property insurance market is more than just a “one-hit wonder.” If the 2004 and 2005 hurricane seasons taught us anything, it is that Florida is susceptible to multiple storms in a short period of time, and it should be financially prepared for it.
