Florida’s Insurance Crisis and the Warning Signs of Regulatory Capture

For years, Floridians were given a relatively simple explanation for the state's property insurance crisis. Insurance companies were losing money, excessive litigation was driving carriers out of business, attorneys and contractors were exploiting the system, and insurers needed legislative relief before the market collapsed. There was truth within parts of that explanation. Florida unquestionably had extraordinarily high property-insurance litigation, enormous catastrophe exposure, rising reinsurance costs, and multiple insurer insolvencies. The Office of Insurance Regulation reported that Florida represented roughly 7 percent of homeowners claims nationally in 2021 while accounting for more than 76 percent of homeowners lawsuits reported in the available multistate data. Those numbers deserved serious attention. The problem is not that Florida investigated litigation. The problem is that we now know regulators possessed information suggesting another significant part of the insurance industry's financial structure also deserved intense scrutiny, and that information did not receive comparable public attention when lawmakers were deciding how to fix the market.

That is where the concept of regulatory capture becomes relevant. Regulatory capture occurs when an agency created to regulate an industry becomes disproportionately influenced by the interests, assumptions, information, or priorities of the industry it regulates. Capture does not require bribery, secret payments, or criminal conduct. It can occur more subtly when regulators begin seeing problems primarily through the industry's perspective, when industry explanations dominate the policymaking process, or when regulatory structures become better at scrutinizing consumers and outside participants than scrutinizing the financial behavior of the regulated companies themselves. Florida's property insurance history presents several warning signs that deserve to be examined through that lens.

The Report Florida Did Not See

One of the most troubling pieces of evidence surfaced years after Florida began dismantling major policyholder remedies. The Office of Insurance Regulation commissioned Risk & Regulatory Consulting to examine transactions between Florida property insurers and affiliated companies. The examination ultimately covered 53 insurers. According to subsequent reporting and legislative testimony, the consultant considered its work essentially completed in April 2022, yet the analysis was not presented to lawmakers or publicly released while the Legislature was debating some of the most consequential insurance legislation in modern Florida history.

What the analysis found should have demanded attention. Excluding certain outliers, the insurers studied collectively reported approximately $432 million in net losses between 2017 and 2019 while their affiliates generated approximately $1.8 billion in net income. The study also reported hundreds of millions of dollars in shareholder dividends and identified concerns about the reasonableness of numerous affiliate arrangements. Reporting on the study indicates that 20 of the 53 insurers examined had affiliate fee structures classified as not fair and reasonable, while another 16 lacked sufficient information for a determination.

This does not establish that $1.8 billion was improperly removed from insurers, nor does it prove that affiliate transactions caused Florida's insurance crisis. The consultant herself did not conclude that the fees caused insurer insolvencies or higher premiums. That distinction matters. Affiliates perform legitimate services, including underwriting, claims administration, management, and other functions, and those services cost money. The important question is whether those transactions were reasonable, whether they weakened regulated insurance companies, and whether regulators and lawmakers understood their significance when evaluating the industry's claimed financial distress.

Florida law itself recognized the potential danger. Section 624.424 required insurers paying fees, commissions, or other financial consideration to affiliates to provide information requested by OIR and required those payments to be "fair and reasonable." The statute specifically instructed OIR to consider the actual cost of the service being provided. In other words, Florida already recognized that affiliate transactions could create a regulatory concern.

Follow the Premium Dollar

The corporate structure matters because the insurance company writing the homeowner's policy may be only one company inside a much larger corporate organization. An affiliated managing general agent, claims administrator, management company, or other entity can provide services to the regulated insurer and receive compensation for those services. Money therefore can leave the regulated insurance company as an expense while simultaneously becoming revenue for another company under related ownership.

That distinction changes how we should think about an insurer reporting a loss. An underwriting loss at the regulated insurance company does not automatically mean the entire corporate enterprise lost the same amount of money. If substantial premium revenue is transferred to related companies through legitimate expenses, the regulated insurer can show poor financial results while another part of the corporate family remains profitable. That does not automatically make the arrangement improper, but it means regulators cannot determine the economic condition of an insurance enterprise merely by looking at the regulated carrier's bottom line.

The 2022 analysis makes that issue particularly important. Reporting on the study found that compensation under managing-general-agent arrangements reviewed by the consultant ranged from approximately 20 percent to 34 percent of premium. The consultant concluded that many single-state or regional insurers appeared to use MGAs as a revenue stream for their holding companies. Those findings do not prove wrongdoing, but they should have generated a fundamental regulatory question: before blaming policyholder litigation for the financial condition of insurers, how much of every premium dollar was leaving those insurers through affiliated entities, and were those charges genuinely fair and reasonable?

Then Came the Legislative Solution

The timing is what makes the situation especially difficult to ignore. Florida's government entered the 2022 insurance debate emphasizing litigation, insurer underwriting losses, insolvencies, reinsurance pressures, and market instability. Governor Ron DeSantis' proclamation calling the May 2022 special session specifically cited frivolous lawsuits, underwriting losses exceeding $1 billion, insolvencies, rising Citizens enrollment, and the extraordinary percentage of national homeowners litigation occurring in Florida.

Later that year, the Legislature enacted SB 2-A. The legislation eliminated one-way attorney fees in residential and commercial property insurance litigation, prohibited assignment of post-loss insurance benefits for new policies, modified bad-faith litigation requirements, created additional reinsurance assistance, and enacted other significant changes. The Legislature described the legislation as an effort to stabilize the insurance market and address excessive litigation.

Consider the imbalance in the information available to policymakers. Florida aggressively examined what policyholders, contractors, attorneys, and other claim participants were costing insurers. The state collected litigation information down to claimant attorney fees, litigation expenses, expert-witness costs, and even contingency-fee multipliers. Florida law specifically required OIR to collect claims information so regulators could track litigation and claims trends.

At approximately the same time, an OIR-commissioned examination was raising questions about money flowing from insurers to affiliated companies. Yet lawmakers considering sweeping restrictions on policyholder litigation did not have that analysis before them. Years later, legislators from both parties demanded explanations about why they had not seen it. The author of the report testified in 2025 that her firm submitted what it considered the final draft on April 1, 2022 and received no requests from OIR for changes. Current and former regulators maintained that the document had not been finalized and pointed to the enormous workload facing the agency during the insurance crisis.

That does not prove a conspiracy. It demonstrates something arguably more important from a regulatory standpoint: Florida policymakers may have been making enormously consequential decisions with an incomplete picture of where insurance money was going.

When the Regulated Industry Defines the Problem

This is where regulatory capture can become institutional rather than corrupt. If an industry successfully defines the central problem confronting regulators, the available solutions naturally follow that definition. If litigation is defined as the overriding cause of the crisis, then reducing litigation becomes the solution. If attorneys are the problem, attorney fees become the target. If assignments of benefits are the problem, assignments are eliminated. If fraudulent or inflated claims are the problem, claims restrictions become the response.

But if affiliate transactions, capitalization, corporate structures, executive compensation, reinsurance arrangements, catastrophe exposure, litigation, claims practices, construction costs, fraud, and attorney fees are all potential contributors, then the proper regulatory response becomes considerably more complicated.

That broader examination appears to be happening now. In 2025 lawmakers considered legislation imposing additional standards on compensation arrangements and affiliate transactions, including provisions requiring consideration of actual service costs, financial condition, debt, dividends, and whether affiliate arrangements benefit the insurer. Florida's existing statutes now expressly require affiliate payments to be fair and reasonable, with OIR considering the actual cost of the services provided.

The obvious question is why this level of scrutiny was not central to the conversation before Florida dramatically altered the rights of policyholders.

The Revolving Door Does Not Help Public Confidence

Florida's insurance regulatory history also presents another classic warning sign associated with regulatory capture: the revolving door between government and the industry it regulates. Former Insurance Commissioner David Altmaier left OIR in December 2022 after overseeing the agency during the period in which Florida enacted sweeping insurance reforms. Within months, he joined the board of Aspen Insurance Holdings and became a lobbyist and insurance consultant with The Southern Group. Florida's restrictions prevented him from lobbying his former agency during the applicable period but did not prevent lobbying legislators.

None of that establishes that Altmaier acted improperly while commissioner. Government officials are entitled to pursue private employment after public service, and expertise developed in government naturally has value in private industry. Nevertheless, the appearance matters. When the official responsible for regulating an industry can leave government and shortly thereafter become professionally valuable to companies and lobbying interests operating in that same field, the public has legitimate reasons to question whether the regulatory system creates appropriate separation between regulator and regulated.

Regulatory capture often grows in precisely this environment. Regulators and industry professionals attend the same meetings, analyze the same actuarial information, speak the same technical language, and confront the same market problems. Over time, the regulator can begin identifying the health of the industry with the public interest itself. A financially healthy insurance market certainly serves the public interest, but the interests are not identical. An insurance system exists ultimately to transfer risk and pay covered losses. Solvency matters because insurers must be capable of fulfilling those promises, not because profitability is itself the government's ultimate objective.

Policyholders Paid for the Experiment

The consequences of Florida's approach were substantial. Policyholders lost significant procedural and economic protections. One-way attorney fees had historically allowed an insured who successfully sued an insurer to recover reasonable attorney fees. Following the 2022 reforms, residential and commercial property cases no longer carry that statutory right under the provisions that previously provided it.

That change fundamentally altered the economics of relatively modest insurance disputes. A homeowner disputing $20,000 or $30,000 in unpaid damage must now consider whether hiring an attorney and litigating the case makes financial sense. An insurance company, meanwhile, already maintains claims departments, defense counsel, litigation budgets, experts, and institutional knowledge. Whether one believes the old attorney-fee system encouraged excessive litigation or protected policyholders, eliminating it unquestionably changed the balance of economic leverage in insurance disputes.

The same reforms prohibited post-loss assignments of benefits under newly issued residential and commercial property policies. Again, there were documented concerns about AOB litigation and abuse, and those concerns cannot simply be dismissed. But Florida's response did more than prosecute fraud or punish abusive actors. It substantially redesigned how policyholders could pursue disputed claims.

That distinction is central to the regulatory-capture argument. When an industry experiences a crisis and government's principal response is to reduce the legal exposure of that industry and restrict the mechanisms available to its customers, heightened scrutiny of the industry's own financial practices should occur simultaneously. Otherwise, government risks regulating one side of the transaction much more aggressively than the other.

There Is Evidence the Reforms Worked

Any serious examination must acknowledge what happened next. Florida's property insurance market has improved substantially by several important measurements. OIR reported in May 2026 that 20 property and casualty insurers had entered the market since the reforms, bringing more than $850 million in new capital. OIR also reported that the pooled combined ratio for Florida domestic property companies improved from 116 percent in 2020, 110 percent in 2021 and 109 percent in 2022 to 99 percent in 2023, 94 percent in 2024 and 83 percent at year-end 2025. More than 190 residential rate filings had requested decreases or no increase.

Citizens has also undergone substantial depopulation, and policyholders in many areas are receiving rate reductions. OIR and the DeSantis administration attribute much of that improvement to the litigation and insurance reforms, declining litigation, improved loss experience, lower reinsurance costs, and increased private-market participation. Those results are significant and should not be ignored merely because they complicate the regulatory-capture argument.

But market improvement does not resolve the historical question.

If eliminating policyholder litigation rights improved insurer profitability, that tells us the reforms affected insurer expenses. It does not establish that litigation was the only cause of the crisis, that every restriction imposed on policyholders was necessary, or that affiliate transactions were adequately regulated beforehand. Multiple things can be true simultaneously. Florida could have suffered from excessive litigation, excessive AOB activity, enormous catastrophe exposure, rising reinsurance costs and inadequate oversight of affiliated-company transactions.

The failure was treating those possibilities as though they were mutually exclusive.

Florida Needed an Audit Before It Needed a Narrative

That is why I have consistently argued that major insurance rate increases should be accompanied by meaningful financial scrutiny. If an insurer tells Florida regulators that it requires dramatically higher premiums because it is losing money, regulators should examine more than the carrier's underwriting statement. They should follow the premium dollar throughout the entire corporate structure.

How much went toward claims? How much went toward reinsurance? How much went toward defense costs? How much went toward commissions? How much went to affiliated MGAs? How much went toward management fees? How much went to parent companies? How much was distributed through dividends? How much did executives receive? What services did affiliated entities actually perform, and what would comparable services have cost in an arm's-length transaction?

Only after answering those questions can regulators credibly tell homeowners that a rate increase is necessary.

Florida law charges OIR with reviewing rates to ensure they are not inadequate, excessive, or unfairly discriminatory and with monitoring the financial condition and solvency of regulated insurers. Those responsibilities make comprehensive financial examination part of the regulatory mission, not an attack on the insurance industry.

Accountability Must Work Both Ways

Florida absolutely should prosecute insurance fraud. It should address fraudulent claims, abusive litigation, dishonest contractors, unethical public adjusters, attorneys who exploit the system, and anyone else artificially increasing the cost of insurance. Every unnecessary dollar extracted from the insurance system eventually becomes a dollar Florida consumers may have to replace through higher premiums.

But accountability cannot stop at the insurer's front door.

If contractors deserve scrutiny, insurers deserve scrutiny. If attorneys' fees deserve examination, affiliate management fees deserve examination. If public adjusters must justify their conduct, insurance executives and corporate affiliates should be expected to justify theirs. If a homeowner's claim is scrutinized down to individual line items, an insurer asking millions of Floridians for higher premiums should withstand equally rigorous scrutiny of where those premium dollars ultimately go.

That is not anti-insurance. It is regulation.

Florida needs financially strong insurers. Without adequate capital and reasonable profitability, companies will not assume billions of dollars of hurricane exposure, and homeowners will ultimately suffer. But a healthy insurance market cannot be measured solely by insurer profitability, combined ratios, or the number of carriers entering the state. It must also be measured by affordability, competition, claims performance, consumer access to remedies, financial transparency, and whether covered losses are paid accurately and promptly.

The Real Lesson of Florida's Insurance Crisis

The most disturbing part of Florida's insurance story is not that litigation was investigated. It should have been. The disturbing part is that Florida possessed evidence raising serious questions about another part of the financial equation while lawmakers were being asked to fundamentally restructure the relationship between insurers and their policyholders.

The subsequent market recovery demonstrates that the reforms affected insurer economics. It does not erase the need to ask whether policymakers were given the entire financial picture before those reforms were enacted.

That is why Florida's experience exhibits warning signs commonly associated with regulatory capture. The evidence does not establish that every regulator was captured, that insurers secretly controlled the govern