Hurricanes battering the shoreline. Swift currents inundating properties further inland. Such environmental calamities frequently convert Florida into the epicenter for risk management, encompassing modifications in insurance policies and expenses. A novel initiative by Florida State University’s Risk Management and Insurance (RMI) Center – in collaboration with the Florida Office of Insurance Regulation (OIR) and the Florida Surplus Lines Service Office (FSLSO) – seeks to offer a distinctive, thorough perspective on every aspect of the state’s insurance industry.

“The university’s RMI program and faculty are widely recognized and respected by the Office of Insurance Regulation for their proficiency and commitment to Florida’s residential market,” remarked Michael Yaworsky, Florida Insurance Commissioner. “By granting the program unrestricted access to our data, they can assist the office in investigating trends within the residential sector and aid in pinpointing challenges before they become significant issues.”

The extensive data analysis undertaking signifies the most recent instance of legislators consulting the FSU College of Business and the faculty expertise accessible through its RMI center and the Dr. William T. Hold/The Alliance’s Program in Risk Management and Insurance. The extensive knowledge possessed by FSU RMI faculty – refined over decades of research focused on minimizing financial risk and bolstering economic revival – can provide informed responses to some of the world’s most catastrophic challenges.

“This latest collaboration between the state and university underscores the tangible advantages of research,” stated Michael Hartline, dean of the FSU College of Business. “As our faculty members generate new insights, their discoveries often illuminate connections between causes and outcomes, furnishing better data for policymakers responsible for crafting solutions that ultimately serve the common good.”

This ongoing scholarship has enabled the FSU RMI faculty to attain the No. 4 position nationally and No. 6 globally for its substantial amount of research published in premier journals, as per the University of Nebraska-Lincoln Global Research Rankings of Actuarial Science and Risk Management and Insurance. As one of the oldest and largest RMI programs in the nation, FSU consistently ranks among the top universities for its research and prestigious RMI degree offerings, thriving in the largest catastrophic risk market in the U.S. and the seventh-largest insurance market globally.

Mark Shealy, director of FSLSO, highlighted that FSU RMI’s current project in collaboration with the state of Florida, the Market Health Study Analysis, represents the first comprehensive market assessment in several years and includes data from numerous sources.

“This presents a unique and significant opportunity to assess the entirety of the market, allowing us to produce extensive insights over time,” Shealy remarked. He anticipates that the resulting analysis will unveil new information pertaining to “catastrophic events, reinsurance shortages, available foreign and domestic carrier capacity, operational tort environment, development impacts of construction codes, and inflation in building costs.”

Charles Nyce, chair of FSU’s Department of Risk Management/Insurance, Real Estate and Legal Studies and the Dr. William T. Hold Professor of Risk Management and Insurance, along with Gabriel Carrillo, executive director of the FSU RMI center, indicated that this data exploration and analysis build upon the department’s extensive legacy of relevant research in risk management and insurance, particularly concerning alleviating storm damage and associated costs.

Nyce expressed that the RMI program and center have been deliberate in obtaining projects that enable faculty members to leverage their expertise towards public initiatives aimed at coping with catastrophic events and fostering community resilience.

“We are engaged in an interdisciplinary approach to finding solutions,” Nyce stated.

The subsequent list encapsulates recent investigations by FSU RMI scholars that furnish data and analysis for those shaping public policy:

• Homeowners Insurance and Housing Prices: Examining the influence of insurance pricing on Florida’s real estate market.
  • Among the key findings: A 10% increase in homeowners insurance rates results in a reduction of housing prices by at least 1.4%, significantly affecting mortgage-financed buyers and primary homeowners more than investors. It is not the disasters themselves but the subsequent insurance cancellations that lead to decreased housing values.

• Market Health Study Analysis: Collaborating with the Florida Office of Insurance Regulation and Florida Surplus Lines Service Office to scrutinize Florida’s entire insurance marketplace. Currently in progress.

• National Flood Insurance Program (NFIP) Community Rating System Study: Collaborating with the Florida Office of Insurance Regulation to assess the advantages and long-term impacts for communities utilizing the Community Rating System (CRS) for reduced insurance premiums.
  • Among the key findings: Florida communities that implemented substantial cumulative improvement regulations did not experience increased flood insurance enrollment rates. There might be more effective means for communities to enhance flood insurance discounts that are simpler to execute and comprehend. Read more.

• Public-Private Partnership in Catastrophe Risk Management: Collaborating with FSU’s LeRoy Collins Institute to investigate methods for mitigating catastrophic risk expenses in Florida.
  • Among the key findings: Improved financing for significant mitigation efforts is necessary to minimize the rising risk profile in Florida. Government involvement in insurance markets needs to be better synchronized with private sector initiatives to reduce market inefficiencies and maintain location incentives.

• Regulatory Capital and Catastrophe Risk: Investigating property insurers’ reactions to alterations in required capital reserves.
  • Among the key findings: Home insurance premiums escalate in zip codes most impacted by regulatory capital reforms, primarily those stipulating insurers to retain additional capital while underwriting catastrophic risk.

FSU scholars co-leading one or more of listed studies: Patricia Born, the Payne H. and Charlotte Hodges Midyette Eminent Scholar in Risk Management and Insurance; Gabriel Carrillo, executive director of the FSU’s RMI Center; Evan Eastman, Independent Life and Accident Insurance Associate Professor of RMI; Brad Karl, State Farm Associate Professor of RMI and the center’s research director; Kyeonghee Kim, assistant professor of RMI; Charles Nyce, chair of FSU’s Department of Risk Management/Insurance, Real Estate and Legal Studies and the Dr. William T. Hold Professor of RMI; and Tingyu Zhou, Dean and Kathy Gatzlaff Associate Professor of Real Estate.

Numerous research studies have or will be showcased at the following academic conferences: Allied Social Sciences Association; American Real Estate Society; American Risk and Insurance Association; the Center for the Economic Analysis of Risk-Munich Risk and Insurance Center; the Eastern Finance Association; the Risk Theory Society; Southern Risk and Insurance Association; and the Southern Finance Association.

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