Rating agency Demotech has highlighted reinsurance as one of the key’s to Floridian insurer’s survival as companies continue to be thrown into unchartered waters with the ongoing repercussions of AOB’s and the Johnson and Sebo court ruling.
Demotech advised insurers to focus on adequate reserves, realistic pricing, and a catastrophe reinsurance programme, whose “horizontal and vertical protection addresses the needs of policyholders and investors by assuring, at a high yet reasonable level of maximum loss, the survival of the insurer.”
The rating agency said despite the growing challenges Florida insurers have been facing, most carriers passed rating assessment with flying colours, affirming that companies have taken previous warnings over capital sufficiency seriously.
“Due to recommitments and recapitalization to meet the requirements of maintaining an FSR of A or better, downgrades have been largely avoided at this time,” said Demotech.
But the agency stressed that for Floridian carriers, the storm had not yet passed, and if the assignment of benefits (AOB) epidemic continues to hit the industry, carriers could be looking at future downgrades; “insurers may face downgrades in the future, consumers may face higher and frequent rate increases, and investors who would otherwise capitalize or fund Florida-based insurance companies will deploy their capital elsewhere.”
Demotech will be reviewing Floridian insurer’s end of March financial statements and issuing reviews of preliminary and final catastrophe reinsurance programmes by June 1st.
