This resolution recognizes the severe stress on Florida's insurance market due to climate risks and calls for federal examination of insurer ratings and the potential need for state-backed insurer bailouts.
Sheldon Whitehouse
Senator
RI
This resolution highlights the severe stress on Florida's insurance market due to climate risks, noting the departure of major insurers and the insolvency risk of smaller ones. It calls on Fannie Mae and Freddie Mac to examine the rating practices of Demotech, which significantly impacts mortgage eligibility. Furthermore, the Senate requests a study on the likelihood of state-backed insurers, like Florida's Citizens Property Insurance, requiring a federal financial bailout.
Florida Climate Risk Could Trigger Federal Bailout, Prompting Government Review of Insurance Ratings
This resolution doesn't change any laws today, but it’s a big, official alarm bell ringing over the state of Florida’s home insurance market. Essentially, it confirms what many homeowners already know: climate change, specifically the risk of catastrophic hurricanes, is making the insurance market gravely stressed and unstable. It officially finds that major insurers are pulling out, leaving behind smaller, local companies with higher insolvency risks.
The $14,000 Problem: Why Your Mortgage is At Risk
The resolution highlights two major issues that hit regular people right in the wallet and the home equity. First, homeowners in Florida are currently shelling out an average of $14,000 annually for home insurance, a cost that shot up 34% since late 2022. That’s a massive hit to any household budget. Second, the resolution points out a crucial link between home insurance and your mortgage: for a mortgage to be eligible for the government-backed security program (Fannie Mae and Freddie Mac), the home insurance must come from a highly-rated company. This market is heavily dependent on the credibility of one specific rating agency, Demotech, which rates many of the smaller, remaining insurers. If those ratings falter, it could destabilize the whole housing finance system.
The Bailout Question and Federal Scrutiny
This resolution calls for two key actions from federal agencies. First, it asks Fannie Mae and Freddie Mac—the giants that back most residential mortgages—to closely examine the rating practices of Demotech. This is a big deal because if Fannie and Freddie decide those ratings aren't reliable, it could make it much harder for people to get or keep a mortgage in Florida, potentially freezing the housing market. Second, the resolution calls on the Federal Insurance Office within the Treasury Department to study the likelihood that state-backed insurers of last resort (like Florida’s Citizens Property Insurance) will need a federal financial bailout.
The Citizens Catch: The Hidden Surcharge Risk
This is where the risk gets real for every policyholder in the state—even those who don't insure with the state-backed option. The resolution specifically notes that Citizens Property Insurance, the insurer of last resort, has the authority to levy surcharges on all policyholders in the state to cover its losses. It warns that there are “credible scenarios” where Citizens’ losses could exceed its ability to pay claims. If that happens, every homeowner, business owner, and renter with any insurance policy in Florida could be footing the bill for catastrophic hurricane damage through a mandatory surcharge. This provision highlights a massive, hidden systemic risk that could turn a natural disaster into a statewide financial crisis for everyday people.