RenaissanceRe could further reduce its exposure to Florida domestic companies if rate increases do not meet the companies return hurdles this year, according to its President and CEO, Kevin O’Donnell.
Speaking in an earnings call alongside the release of RenRe’s Q4 and 2019 results, O’Donnell warned of “substantial structural issues” that continue to affect its business in the state.
“We’ve seen loss creep, we’ve seen ineffective legislation change with regard to AOB and as we look at that market, our view is it goes up or we reduce,” he said.
“So I’m not going to forecast what the change will be, but I will say unless we see changes that meet our return expectations, we will reduce in 2020 like we did in 2019.”
RenRe experienced a number of large natural catastrophe losses in the last quarter of 2019, including a $175 million impact from Typhoon Hagibis, based on a $15 billion industry loss.
But O’Donnell noted that the market is also continuing to see billions of dollars of loss creep in Florida from events in previous years, including from Hurricane Irma in 2017 and Hurricane Michael in 2018.
The CEO argued that the ongoing losses from these events indicate that any potential benefits due to reforms surrounding assignment of benefits (AOB) laws in Florida have yet to be realised for re/insurers.
“This is deeply disappointing,” he remarked. “Several Florida domestics are now close to exhausting their 2017 private market reinsurance. This is yet another indicator of the deep structural problems afflicting Florida.”
In addition, Florida is increasingly exposed to the effects of climate change such as rising sea levels, increased rainfall and flooding and intensifying hurricanes.
“Although it is easy to talk about the June renewal, I can say that these two factors are materially impacting our view of Florida and will result in the need for substantial rate increases,” O’Donnell added.
“Florida has always been and will always be an important market for RenRe. We have been leaders in this business for a decade. That said, we reduced our exposure to Florida domestic companies last year and are prepared to do so again if rate increases do not meet our return hurdles.”
At the same time, O’Donnell confirmed that RenRe would continue to explore additional means for accessing wind risk in the Florida market.