Following a conference call with several industry experts to discuss Florida market conditions and trends, analysts from the Buckingham Research Group say there are reasons for optimism despite the challenges currently associated with pricing and Assignment of Benefits (AOB).
Despite indications that more of the state’s insurers are participating in the Florida Hurricane Catastrophe Fund (FHCF), which could put downward pressure on pricing, speakers believed that loss-affected layers should still see around 10% rate increases due to continued adverse development from 2017 and 2018 catastrophe events, while non-loss accounts might be flatter.
Conference call participants – which included senior staff from Citizens Property Insurance Corporation, Demotech and Raymond James – discussed a number of factors that could affect reinsurance demand at 6/1 including new Demotech requirements to reserve for a 1-in-130 year event instead of 1-in-100 as well as increased participation in the FHCF.
Demotech noted that it was surprised to the reaction to the changes since two thirds of Demotech-rated companies already reserve at 1-in-130 or above; therefore, it sees minimal positive impact on demand from a reinsurance perspective.
Concurrently, and with the same conclusion, Kapil from Raymond James Public Finance unit mentioned that while participation in the FHCF is rising to an aggregate 81%, is actually the normal run rate going back to 2015. Additionally, he believed that private participation will be more likely in the upper layers.
On the topic of AOB, analysts say the main takeaway was that the number of AOB cases has quadrupled in Florida since 2013.
In fact, 50% of Citizens’ claims are currently being litigated, while 75% of 2018 closed claims involved AOB.
Currently, policymakers are working on solutions to help mitigate the problem. On Irma creep, Demotech mentioned that some of the creep stems from what it felt was models not fully capturing the exposure and resulting loss creep.
Lastly, analysts state that general sentiment from the conference call indicate Florida insurers are in good shape from a solvency perspective.
Demotech noted its pressure on capital adequacy and reserves, while Citizens noted that its efforts on depopulating had worked and current depopulation numbers were a fraction of what they were a few years ago.
