Florida-based HCI Group’s founder and Chief Executive Officer (CEO), Paresh Patel, revealed recently that the company will wait until after the special session in late May to complete is reinsurance placement.
Earlier this week, Florida’s governor Ron DeSantis called for a special session to consider legislation to improve the prospects of the state’s property insurance market.
The challenges in the market are widespread and many are highlighting an urgent need for legislative and structural reforms to ensure domestic carriers can operate, and that reinsurers want to participate in the space.
The Q1 2022 reporting season has shone a light on the troubles within the Florida market, with some continuing to retreat from the sector, while executives from numerous insurers and reinsurers, including HCI Group, discussed the current state of the market.
Founder and CEO of HCI Group, Patel, noted growing awareness of the issues facing the Florida property market, explaining that this has led the firm to take a deeper review of the situation.
“In recent weeks, we’ve also had meetings with reinsurers and the overall feedback has been very positive. Plenty of reinsurance capacity is available for HCI and we receive continued interest from the reinsurers to join the HCI program,” he said. “However, we must wait to see what comes up from the special session to get a final pricing outcome on this year’s reinsurance placement.”
Throughout Q1 reporting season, some reinsurers have highlighted the need for more rate in the Florida property market, citing this as a reason for their pull-back from the space. Meanwhile, analysts said recently that to ensure progress in Florida it might be necessary for reinsurers to pull capacity from the state, essentially forcing a dramatic shock to the system.
It’s a complex and uncertain picture, and while reinsurance is available for carriers like HCI, it’s not cheap, and the challenging situation / upcoming special session has led the carrier to take a closer look.
“In terms of the placement, this is why we made the comments just so that we were transparent with all the investors, is that because of the special session, finalising reinsurance will be a little bit later this year than you would expect in other years.
“Having said all of that, the way that’s probably going to go is, as soon as clarity comes through on the cat fund, I think people will start placing programs and getting it done,” said Patel.
The cat fund Patel refers to is the Florida Hurricane Catastrophe Fund (FHCF), which makes up a component of HCI’s Florida reinsurance coverage for its two insurance subsidiaries. It’s understood that the special session, scheduled for late May, will discuss a reduction in the the level of attachment of coverage from the FHCF.
“The cat fund adjustments, et cetera, right, that is obviously one of the items that has been discussed. The problem obviously is you don’t know whether that’s what will happen or they’ll do something else or whatever. So, you could do a lot of what-if scenarios, and that’s why, while we’re encouraged, we’ve not made any conclusions as to what’s going to happen,” said Patel.
As a reminder, at the 2021 mid-year renewals, HCI secured reinsurance for Florida for both its Homeowners Choice Property & Casualty Insurance Company, Inc. (Homeowners Choice) subsidiary and its TypTap Insurance Company (TypTap) entity.
The 2021-2022 Homeowners Choice Florida reinsurance program provided coverage up to $967.6 million for catastrophic losses in a single event, excluding flood losses. The total coverage for all occurrences was $1.33 billion, and the reinsurance retention, excluding flood coverage, was set at $16 million for both first and second event.
Additionally, the program featured a FHCF component, estimated to cover 90% of $638.5 million in excess of a $254.2 million retention at a total estimated cost of $40.9 million.
TypTap, meanwhile, had a Florida reinsurance program that provided coverage up to $452.4 million for a single event, with total coverage for all occurrences coming to $643.6 million. Again, the FHCF component covered 90% of $241.2 million in excess of a $96 million retention at a total estimated cost of $15.4 million.