New commentary from AM Best suggests that the depopulation of state-backed Citizens Property Insurance Corporation is proving successful, with Hurricane Isaias likely to have a smaller impact on the insurer than it would have had without the depopulation.
Isaias was the first hurricane of what the rating agency described as a “quiet” Atlantic hurricane season. It made landfall near Destin, Florida, on October 9 as a Category 2 storm.
Insured losses from the event are estimated at low single-digit billions of dollars, with most expected to be wind-related. This is relatively low compared with losses from storms in recent years.
AM Best said the strongest winds were recorded on the western side of the storm, blowing water away from the coast and limiting storm surge damage and, consequently, flood losses.
“Across the industry, particularly in Florida, the losses are likely to be dampened by the progress many carriers have made in improving pricing and underwriting, translating to improved earnings that can better absorb such an event,” the rating agency said.
The hurricane is not expected to significantly deplete surplus levels or alter industry-wide capacity in Florida, avoiding the squeeze that could otherwise lead to a pricing surge.
Similarly, reinsurance capacity and pricing are not expected to be dramatically impacted.
AM Best concluded, “Legislative reforms and incentives have led to the depopulation of Citizens Property Insurance Corporation, the state-backed insurer of last resort, with policies spread among several other insurers in Florida.
“The successful depopulation of Citizens, coupled with a relatively mild hurricane season so far, will keep Citizens intact as Florida’s insurer of last resort.”
