TALLAHASSEE — When Floridians go to shop around for a new homeowners insurance policy next year, they could find several new companies offering coverage. Including one company backed by a current state senator.

Lured by the nation’s highest premiums and new laws making it harder to sue insurance companies, investors see an opportunity in Florida’s broken insurance market. Current and former state officials and others said they are receiving regular inquiries from potential investors looking to make a profit.

“As soon as we were done with the last vote in session, I had a couple of people … including legislators, asking if I wanted to invest in an insurance company,” Sen. Jason Pizzo, D-Hollywood, told the state’s insurance commissioner last month.

That includes state Sen. Joe Gruters, R-Sarasota, who has pitched fellow lawmakers on investing in a new homeowners insurance company that projects a 165% return on investment over five years.

Investing millions of dollars into one of the nation’s most volatile insurance markets might seem like folly. Hurricanes and floods are multiplying. Meanwhile, companies have gone insolvent without being hit by either of those threats.

But Florida-based insurance companies employ unusual financial structures that can allow executives to extract considerable profits from homeowners’ premiums.

Those structures, combined with a reduced threat of lawsuits, is an enticing combination, at least to some investors. And Gov. Ron DeSantis and state regulators see it as the solution to the state’s insurance crisis, hoping that free-market competition will eventually drive down rates.

“The market needs green shoots, and it’s exciting to see new companies,” said former state Sen. Jeff Brandes, R-St. Petersburg, who was a vocal supporter of lawsuit reform in the Legislature.

Pizzo, one of the state’s wealthiest lawmakers with a net worth of $60 million, declined to invest in Gruters’ company. He also turned down nearly a dozen other pitches from investors, he said in an interview.

“I just don’t want to be directly involved with profiting off of what I think is less restrictive, or more favorable, conditions for insurers,” Pizzo said.

To the public, the optics of lawmakers forming insurance companies right after passing legislation affecting those companies “probably aren’t great,” he said. But he doesn’t begrudge Gruters for trying.

“If he gets them affordable policies, I don’t think they’ll care,” Pizzo said.

‘A unique and lucrative opportunity’

To solve Florida’s insurance crisis, DeSantis and lawmakers tried to stop people from suing insurance companies, which insurers have blamed for rapidly rising premiums.

Although lawmakers and regulators haven’t proven that lawsuits were driving up rates and causing insurers to go out of business, they passed legislation in December that stopped requiring homeowners insurance companies to pay attorney’s fees when plaintiffs sue and win. This year, they extended that to all insurance companies.

The legislation hasn’t yet had a meaningful effect on homeowners’ premiums, which the industry now says will not go down in the foreseeable future because of factors such as climate change.

But it has sparked immediate interest from investors looking to put their money into insurance companies.

Barry Gilway, the former head of state-run Citizens Property Insurance, said he’s fielding calls from investors at least every two weeks. The reduced threat of litigation and the potential to get started by pulling thousands of policies out of Citizens has them interested, he said.

“You have a number of different investors that are looking at this … as a real potential opportunity,” he said.

Gilway said the market was so active that he’d consider joining one of the companies.

“If the right opportunity came along, I’d get serious about jumping back in,” Gilway said.

One of the new companies is Village Protection Insurance, led by a former executive with the reinsurance broker firm GuyCarpenter, according to the trade journal Inside P&C.

In May the company announced it was raising $75 million from investors, the publication reported. In August, it reported the company changed that target to $55 million. The minimum to start up an insurance company in Florida is $15 million.

Gruters’ role is unclear

It’s unclear what role Gruters, an accountant by trade, has with the company. His involvement has not been previously reported, and he did not respond to calls and text messages for comment.

In a pitch to investors sent by Gruters, company leaders wrote that “there lies a unique and lucrative opportunity for investors” as Florida’s insurance market “undergoes a transformative disruption.” They tout an experienced leadership team with “fresh perspectives” to meet the demands of consumers and investors.

The pitch directs potential investors to a spreadsheet of financial projections showing that the company would take 20,000 policies out of Citizens next year. By 2028, the company would grow organically and be writing $475 million in premiums across 99,596 policies, for an average customer premium of $4,775.

The current statewide average is around $6,000, according to industry groups.

The pitch directs investors to one category of the financials in particular, involving the company’s “managing general agent,” which is an affiliate company. Village Protection Insurance’s managing general agent would charge the company 28% of all premiums, plus a $25 charge for every new policy, typical rates for Florida-based insurance companies.

Most of that money would go to pay a contractor to perform Village Protection Insurance’s business, according to Inside P&C: everything from underwriting to claims management to reinsurance and customer service.

After paying those expenses, tens of millions of dollars would be left over each year to repay investors. By 2028, the company would show a cumulative return on investment of the managing general agent of 165%, the document shows.

“We firmly believe that this venture presents an extraordinary chance to achieve exceptional returns in an environment of change and growth,” the pitch states.

Gruters voted for the December 2022 legislation requiring homeowners to pay their attorneys’ fees, along with other senators who work in the insurance industry. Senate rules require senators to vote on bills unless senators know they would experience a “special private gain or loss” from the measure. In those instances, senators have to disclose why they were abstaining from the vote.

Gruters also voted for this year’s legislation shielding all insurance companies from paying attorneys’ fees in most situations, but he bucked most of his party by voting for an amendment that would have watered down the bill. The amendment failed.