Insurance Rates in Florida continue to spiral out of control.
For Filicia Porter, escalating insurance bills were the final blow. The cost for her assisted-living business in Florida had been rising steeply as the state faced increasingly powerful storms, making the business unsustainable. In March, she made the difficult decision to close her facility near Palm Beach, which she had opened just two years prior. This closure came only four months after shutting down another location in Port St. Lucie, which had been operational since 2017. Together, these closures displaced a dozen residents, leaving them scrambling to find new accommodations.
“Each year you see a rise. Why pay more?” said Porter, who initially started The House of Cares to meet the growing demand for elder care as baby boomers flocked to the Sunshine State. However, with soaring premiums on top of all her other expenses, she found it impossible to keep the business running without “depleting” herself.
Porter’s situation highlights a larger crisis in Florida, where two significant trends are intersecting: the impacts of climate change and the challenges of caring for an aging population. Baby boomers have long been drawn to Florida for its warm weather and low taxes, resulting in one of the highest elderly populations in the U.S. However, the increasing frequency and severity of storms are driving up commercial property insurance rates, placing additional financial strain on care providers who are already grappling with labor shortages, rising wages, and escalating supply costs.
Last year, commercial property insurance costs in Florida surged at nearly five times the national average, according to credit rating firm AM Best Co. Inc. This spike is effectively a new tax on the elder care industry, compounding existing financial pressures. As a result, more nursing homes are closing each year, and many others are struggling to make debt payments. The cost of senior care—from independent living to round-the-clock nursing—is rising, threatening to become unaffordable for many retirees.
“We are headed into a train wreck,” said Pilar Carvajal, founder and CEO of Innovation Senior Living, a Winter Park-based nursing home chain for 339 individuals. Carvajal’s insurance rates have jumped at least 50% in the past five years. “We need help to solve this societal problem,” she emphasized.
While climate change has driven up commercial property insurance premiums nationwide, Florida has been hit particularly hard. Over the past five years, costs in the state have surged by 125%. Last year alone, annual premiums soared by about 27% in Florida, compared to a national growth rate that slowed to nearly 6%, according to AM Best.
“We have many clients that can’t afford the coverage,” said Patrick McConachie, senior vice president at Marsh McLennan Agency in Tampa, who assists senior-living operators with insurance policies. “In a lot of cases in Florida recently, the operator will simply turn the keys back over to the landlord.”
Palm Garden Healthcare, for instance, shuttered its assisted-living facility earlier this year due to skyrocketing costs, said President and CEO Rob Greene. The property insurance bill for his 14-location nursing home chain more than doubled in two years to $2.2 million. Despite paying more for insurance, Greene said the coverage for $75 million in damages is far below the at least $200 million needed.
Since opening in the late 1980s, Palm Garden hasn’t experienced major storm damage, but “come June, we get a little bit nervous,” Greene admitted.
From 2019 to 2023, damage from natural disasters like tropical cyclones and severe storms has at least doubled to as much as $200 billion, compared to the previous decade, according to the National Centers for Environmental Information. This includes Hurricane Ian, the third-costliest hurricane in U.S. history.
The mounting claims have caused several property insurers to fold, driving up rates. However, seven new firms are expected to enter the market this year, according to Mark Friedlander, director of corporate communications at the Insurance Information Institute. Successful negotiations with reinsurers might result in flat or smaller premium increases this year, suggested Jack Walker, senior sales executive at AssuredPartners, an Orlando-based insurer specializing in senior living.
However, until these changes take effect, operators like Innovation and Palm Garden must find ways to pay the escalating bills. Palm Garden’s residents qualify for Medicaid, but the reimbursements are insufficient, according to Greene. “We don’t have the luxury of like, a McDonald’s, of being able to pass on costs,” he said.
Operators serving more affluent retirees may raise and pass on prices, but this could eventually become “unaffordable,” said Margaret Johnson, senior director at Fitch Ratings.
“Residents are feeling the pinch,” noted Raoul Nowitz, senior managing director at SOLIC Capital Advisors, who specializes in restructuring distressed companies and investment banking. Operators are struggling to maintain sufficient cash flow to cover debt, he added.
While the spike in insurance costs is a major problem for all groups in Florida—from homeowners to hotels—it is particularly crippling for the senior care industry. Fitch’s Johnson has a negative credit outlook for the sector.
Since 2009, the majority of first-time payment defaults on debt issued for Florida retirement communities occurred post-pandemic—21 out of 34—according to Municipal Market Analytics. The default rate for senior living in Florida stands at 18%, more than twice the nearly 8% national rate, according to Bloomberg data.
This financial strain has led to the closure of dozens of facilities. In the five years ending 2023, an average of 146 nursing homes or assisted-living facilities closed each year, according to the Florida Agency for Health Care Administration. The year 2022 saw the highest number of closures, coinciding with Hurricane Ian’s landfall and the winddown of federal pandemic aid.
As demand for elder care continues to grow, the prospects for new facilities remain dim. Florida is the second fastest-growing state in the nation, according to the U.S. Census Bureau, and ranks second in the proportion of elderly residents, with about 22% aged 65 and over, compared to 17% for the entire U.S.
New facilities need to open at a faster rate to keep up with the growing demographic, said Lisa Washburn, chief credit officer at Municipal Market Analytics. However, “construction has slowed significantly” across the U.S., she noted. Governmental involvement may be necessary to subsidize or facilitate building, she suggested.
“In Florida, you may not have an income tax,” but insurance is effectively a tax, said Washburn.
Following Hurricane Ian, Carvajal had to install a $200,000 new roof on one of her six facilities to maintain insurance coverage. “How do you make it work when things like property insurance just are becoming so onerous and unpredictable?” she asked. “Looking into the future, if things are going to get worse, I don’t know what we’re going to do.”
