The Litigation Debate: What’s Missing from the Insolvency Story

For years, Florida’s property insurance market has been shaped by a familiar narrative: that excessive claims litigation is the primary force driving insurers into insolvency. It’s a claim that has influenced policy decisions, public perception, and the direction of reform across the state.

But when you look beyond the headlines and into the regulatory data, a more complex story begins to take shape.

The Florida Department of Financial Services’ Division of Rehabilitation and Liquidation, in its 2022 Annual Report, provides a breakdown of what actually contributes to insurer insolvencies. And notably, the findings point to a wide range of operational and financial challenges.

The R&L report’s page 7 lists “factors contributing to insolvency,” including:
• Inadequate capitalization or asset deterioration
• Improper management
• Insufficient claim reserves
• Rapid premium growth
• Inappropriate transactions with affiliates or subsidiaries
• Inadequate premium rates
• Natural disasters or catastrophic losses
• Change in business conditions
• Reinsurance market issues

What stands out is not just what is included, but what is not. Despite years of emphasis from industry voices, claims litigation is not directly named among these primary factors. That omission has raised important questions. If litigation has been positioned as the leading cause of insurer instability, why does it not appear explicitly in the state’s own analysis?

Some policyholder advocates suggest the answer may lie within the factors that are listed. Issues such as improper management, insufficient reserves, and affiliate transactions point to internal decision-making, how companies are structured, how capital is allocated, and how risk is managed. These are not external pressures, but operational realities that can determine whether an insurer remains stable or becomes vulnerable.

Where Litigation Still Fits In

At the same time, regulators have clarified that litigation is still part of the broader picture. While not listed outright, it is considered a contributing force behind several of the identified factors, including reserve strain, asset deterioration, and reinsurance challenges. Florida’s disproportionate share of insurance lawsuits, often cited as 79% of the nation’s total despite a much smaller share of claims, continues to influence costs and long-term claim development.

Reinsurance, in particular, has emerged as a critical pressure point. Rising costs and reduced market participation have placed additional strain on insurers already dealing with capital and reserve challenges. In several insolvency cases between 2022 and 2023, companies struggled not just with claims, but with maintaining surplus, securing reinsurance coverage, and adapting to shifting financial conditions.

A closer look at individual insolvency reports reinforces this complexity. In some cases, litigation is not mentioned at all, with greater emphasis placed on declining financial stability, limited access to capital, or exposure to catastrophic weather. In others, litigation appears as one contributing factor among many, not the defining cause.

Structural Questions Behind the Scenes

References to “inappropriate transactions with affiliates or subsidiaries” have led to concerns about how financial resources are distributed within insurance groups, and whether certain practices may leave insurers under-reserved. These considerations further highlight that the causes of insolvency often extend beyond a single issue.

What ultimately emerges is a more nuanced reality. Florida’s insurance challenges are not driven by one factor alone, but by a combination of internal decisions and external pressures—management practices, capital strategies, reinsurance dynamics, catastrophic events, and legal activity all playing a role.

For policyholders, however, the impact is straightforward. Premiums continue to rise, coverage options narrow, and uncertainty remains. The complexity behind the system does not lessen its consequences, it makes understanding it even more important.

Clarity in a Complex Market

Navigating today’s insurance environment requires more than surface-level understanding. It demands clarity, experience, and a strategy built around the policyholder’s best interest. GlobalPro works alongside homeowners, businesses, and community associations to break down complex policy language, identify risks, and guide critical decisions before, during, and after a loss.

With decades of combined expertise across insurance, construction, and claims management, our team provides hands-on support at every stage of the process, from pre-loss planning and documentation to claim strategy, negotiation, and recovery. The goal is simple: to ensure that policyholders are properly represented, fully informed, and positioned to achieve fair and equitable outcomes.