Several insurance industry trade associations used the 30th anniversary of Hurricane Andrew—a storm that upended and transformed insurance and the manner in which communities prepare for natural disasters—to broadcast their conclusion that man-made threats are today the “root causes of most market instability.”

A paper, “It’s Not Just the Weather: The Man-Made Crises Roiling Property Insurance Markets,” jointly published by the American Property Casualty Insurance Association (APCIA), the Reinsurance Association of America (RAA), the Association of Bermuda Insurers and Reinsurers (ABIR), and former Insurance Information Institute president and economist Robert Hartwig, said costs to insurers from legal system abuse, claims fraud and regulatory interference have created volatile market conditions.

“These unmodeled and largely uncontained risks are in some cases solvency-threatening, obligating insurers to take drastic steps to protect and conserve capital, with predictably adverse consequences on price, coverage availability, and competition,” according to the paper, which singled out Florida, Louisiana and California for “having failed to learn from their past mistakes” by enacting legislation and regulation that hinder insurance markets. The paper details the crises in each state.

The authors conclude that legal system abuse is rampant across the country but is particularly evident in catastrophe-prone states. Claims involving litigation are “increasing at previously unseen rates.” The average personal-injury verdict was $125,366 in 2020, up nearly 320 percent from $39,300 in 2010. Billion-dollar verdicts are becoming more common. Furthermore, the median cost of a single-fatality claim has increased over 240 percent in the last 17 years, according to data within the paper.

In addition, fraudulent property insurance claims represent a growing amount of insurance fraud in the U.S., resulting in additional premiums for families. The Coalition Against Insurance Fraud estimates fraud occurs in about 10 percent of P/C insurance losses.

Meanwhile, state regulators and legislators “too often fail to recognize the real underlying issues, and their actions often unintentionally exacerbate the symptoms and throw markets into further chaos,” the groups said. “To fix broken property insurance markets, insurers have urged state lawmakers and regulators to focus on addressing the underlying issues roiling those markets. Legal system reform, anti-fraud measures, and promoting regulatory stability and mitigation to help reduce future losses are imperative to restoring market health in catastrophe-prone markets.”

The associations said they included within the report recommendations to form an action plan.