New research by KBRA says that Florida property insurers are facing storms on multiple fronts as the 2022 Atlantic hurricane season approaches its peak.
The company’s work refers to the updated Atlantic hurricane season forecast that was released by Colorado State University at the beginning of the month. That work called for 18 named storms, down slightly from July’s forecast of 20 named storms, and continues to see a seventh consecutive year of ‘above-average activity’.
KBRA said it had noted the following things:
▪ Storm Front Number One: The new normal continues; expect more hurricane strikes—It appears that an increase in the annual number of named storms is the “new normal,” increasing the likelihood of landfall events that will further challenge the risk management and surplus positions of property insurers in Florida.
▪ Storm Front Number Two: Losses continue to mount—Despite rate increases, premiums continue to lag losses thereby causing material earnings declines, while ongoing elevated litigation, inflation, and other effects will continue to drive up claims costs.
▪ Storm Front Number Three: Reinsurance more scarce and less affordable—Reduced availability and higher prices within the catastrophe (cat) reinsurance market has generated substantial ongoing pressure within the Florida insurance market.
▪ Storm Front Number Four: Regulators and ratings—An increasing number of companies are facing regulatory actions. This is further exacerbated by what appeared to some as sudden and unpredictable rating actions by one of the legacy rating agencies in the Florida market amid the current storm season.
It wrote: “After a period of relative calm in the Florida homeowners’ market, the last five years has witnessed a period of escalating and significant challenges. Just as Florida insurers are facing challenges on many fronts, KBRA believes that stabilizing the market will take decisive and coordinated action by a variety of different stakeholders (insurers, legislators, GSEs, regulators). In the meantime, like the rest of the industry, KBRA will continue to monitor weather forecasts over the next several months.”
