Florida’s homeowner insurers have experienced a positive turn of events in 2023, benefiting from a milder hurricane season and groundbreaking legislative reforms, according to KBRA.
The state’s insurance landscape, marred by years of significant catastrophe losses and a litigious environment, saw a welcome respite.
The 2023 hurricane season, despite above-average storm activity, witnessed fewer landfalls compared to previous years.
This limited impact contributed to a reduction in claim frequency and overall losses, offering insurers a much-needed breather.
Favourable tailwinds, propelled by legislative reforms enacted in 2022 and a relatively calm hurricane season, led to higher policy pricing, resulting in underwriting gains and modest surplus growth for carriers, according to credit rating agency KBRA.
However, this positive momentum faces challenges from sharply rising reinsurance costs, which have impacted the profitability of primary carriers.
The availability and affordability of reinsurance continue to be a concern, prompting insurers to adopt creative solutions to complete their programs.
Legislative reforms, particularly Florida Senate Bill 2A, signed into law in December 2022, have played a crucial role in stabilising the homeowner insurance market. These reforms aim to reduce litigated claims and loss cost trends, leading to improved capital positions for insurers.
Despite the generally favourable conditions, early indications for the 2024 hurricane season suggest potential challenges.
The forecast points to an increased frequency and severity of hurricane activity, posing a risk of financial erosion for insurers.
Reinsurance remains a crucial element in managing risk for Florida insurers, given their exposure to a Cat-prone geographic area. The reinsurance market has hardened due to the frequency of weather events and an unstable claims environment.
Insurers are strategically navigating this landscape, with some forming captive reinsurers to ensure cost-effective risk transfer capital deployment.
The 2023 hurricane season, while active, saw a limited impact on the U.S. land, with only three storms making landfall.
Legislative reforms and a milder season have positioned existing carriers for moderate growth in the Florida homeowners’ market. New private capital entering the market further fuels expansion, but the impact of rising reinsurance costs remains a factor.
Hurricane Idalia, the only exception to the limited U.S. landfalls, made history as the first major hurricane to hit Florida’s Big Bend region.
Fortunately, its impact on the sparsely populated area contained losses, contrasting with the extensive damage it caused in Big Bend and southern Georgia.
As the industry anticipates the 2024 hurricane season, insurers are cautious about potential challenges but remain optimistic, drawing on the positive tailwinds of legislative reforms and the lessons learned from the recent hurricane experiences.
The delicate balance between growth and risk management will continue to shape the trajectory of Florida’s insurance landscape.
