Ahead of the mid-year renewals, Bermuda-based RenaissanceRe is less interested in the Florida market than in the past, with the company’s Chief Executive Officer (CEO), Kevin O’Donnell, explaining that the outcome in June is “of diminishing consequence to us.”
Plagued by structural and legal issues, the Florida domestic homeowners’ market is in need of reform, leading Governor Ron DeSantis to call for a special session to consider legislation to improve the affordability of property insurance within the state.
RenRe, once a major writer of Florida reinsurance business, has steadily reduced its exposure to the Florida domestic homeowners’ market, with it now representing just 2.5% of the firm’s gross written premium, according to O’Donnell, speaking during the carrier’s Q1 2022 earnings call.
“Consequently, the ultimate outcome of the Florida renewal is of diminishing consequence to us, relative to several years ago,” he said.
RenRe explained earlier this year that it would continue to retreat from the sector amid adverse trends in the Florida market, including litigation trends, claims practices, and exposure growth. On the call, O’Donnell emphasised this, saying that even with rate rises, “we are unlikely to increase offered limits at the June 1st renewal.”
“Florida has a social inflation problem that can’t be solved by rate, because it is ultimately impossible to know how much to charge to cover fraud,” he continued. “It now also has a capacity problem, due to reduced third-party capital appetite, limited retro availability, and severe financial distress at many domestic Florida insurers.”
On the special session, which is scheduled for the end of May, O’Donnell said that while he knows there’s ongoing discussions, including a potential reduction in the FHCF attachment point, “that makes no change in what we do or how we’re looking at the market.”
While O’Donnell feels that a drop in the FHCF attachment point could potentially release some of the immediate pain for domestic players, he noted that “the structural issues are my bigger concern and I think it’s hard to want to perform in that theatre when, at the end of the day, the theatre is on fire because of all the issues within the market.”
For the Bermudian reinsurer, all of this means that unlike mid-year renewals of the past, RenRe is “not that interested in the Florida market, but we do have a lot of southeast Atlantic hurricane risk, which come in through different ways,” said O’Donnell.
“We think we’re going to hold that relatively flat, but harvest more margin for the risks that we’re taking there,” he added.