Despite Florida-focused personal property insurers experiencing material volatility in their operating results and surplus levels in recent years, alongside a reinsurance dependency that “skews” higher than the broader overall property segment, AM Best has noted that their results improved in 2023.
It’s no secret that Florida insurers have been suffering from more frequent and severe weather-related losses, as well as the impact of social and economic inflation.
In response to these factors, reinsurance carriers increased rates, reduced capacity, pushed for higher retentions, and in some cases, sought lower limits to protect their financial positions, as per Josie Novak, financial analyst, AM Best.
“To keep pace with rising reinsurance costs, primary carriers have had to push considerable rate increases onto policyholders, leading to direct premiums written increasing dramatically,” the rating agency said in a recent report on the matter.
AM Best also added that active Florida specialists, in the aggregate, have a much higher reinsurance dependency with ceded reinsurance leverage of 514.7%, compared with the firm’s personal property composite average of 59.1%.
“While some of these primary insurers use reinsurance arrangements to generate income strategically through ceding commissions, a considerably high level of dependency can indicate greater sensitivity to changes in reinsurance pricing and availability,” AM Best explained.
The rating agency additionally commented on the departure of carriers from Florida, which has reportedly contributed in part to the overall significant growth at Citizens Property Insurance Corporation.
“Citizens has more than doubled its policy counts in the last two years, topping 1.4 million in September 2023,” AM Best said.
Christopher Draghi, director, AM Best, continued, “With such exposure, a major loss event in the most hurricane-prone state may deplete Citizen’s surplus and strain its financial stability which could have a widespread market impact if severe enough.”
As per the state’s regulator, these changes have enhanced consumer protections, strengthened Citizens, and encouraged investment by re/insurers.
As Reinsurance News understands, rate decreases are being announced by some Florida specialist property insurance carriers, and in some cases, the OIR is pushing carriers to reduce rates after they reported better-than-anticipated underwriting income in 2023.
While this is all a sign of an improving marketplace in Florida, some are asking whether rate decreases are too early given the forecasts for a very active hurricane season.
Nonetheless, early signs from the 2024 reinsurance purchasing season are showing further positive indications.
It would seem AM Best somewhat echos this sentiment, having stated in its report, “Higher homeowners’ premiums, a decline in legal costs related to recent legislative efforts and the ongoing de-population of the state-backed insurer of last resort are the backdrop as Florida’s property insurance market churns toward another hurricane season.”
