Andrew Tang, Chief Investment Officer at Turner Financial Group, said that Florida homeowners are increasingly being pushed into the state-run Citizens Property Insurance as private insurers exit the market due to litigation, fraud, and natural disaster risks.
"In Florida, about 15-20% of homeowners struggle to secure private insurance due to high litigation, fraud, and hurricane risks," said Tang. "Citizens covers roughly 20-25% of the state's 5 million owner-occupied homes, insuring 1.17 million policies as of February 2024. Some choose Citizens for lower rates, but others have no choice as private insurers exit or deny coverage. Critics call Citizens subpar for its limited coverage, higher claim denials (over 50% last year), and potential assessments on all policyholders if claims exceed reserves."
The entry of reciprocal insurance exchanges into Florida's property insurance market has introduced a member-centric model that allows policyholder governance and shared financial responsibility. According to Investopedia, in this structure, policyholders collectively insure one another and participate in the exchange's management through an attorney-in-fact. This approach fosters transparency and aligns the exchange's operations with the interests of its members, potentially leading to more responsive and equitable insurance solutions.
Reciprocal exchanges often operate on a non-profit basis, which allows them to offer lower premiums and issue dividends or rebates when underwriting results are favorable and claims volume is low. This approach contributes to cost efficiency while maintaining solvency through pooled risk, making the model appealing in catastrophe-prone markets like Florida. According to the Florida Office of Insurance Regulation, recent approvals include multiple new reciprocals such as the Apex Star Reciprocal Exchange and the Condo Owners Reciprocal Exchange, reflecting regulatory support for diversification and stabilization efforts.
As reported by Insurance Business, reciprocal insurance exchanges introduce an alternative structure in markets traditionally dominated by a few large insurers. By offering more affordable and flexible coverage options, these exchanges increase consumer choice and can compel incumbent insurers to improve their offerings. This diversification fosters a more competitive environment, potentially leading to better services and pricing for policyholders.
Tang is the Chief Investment Officer of Turner Financial Group with over 20 years of experience in the financial services industry. He assists clients with wealth protection, growth, and transfer through objective and customized strategies and supports advisors in managing client portfolios across multiple robust managed platforms. He holds a BA in Economics from Boston University and certificates in Commodities Trading and Financial Planning from New York University. Previously, he served as Chief Investment Officer at Claraphi Advisory Network, overseeing liquid investment strategies and advisor training.