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The stars are “aligned” for private capital to enter Florida: JLT Re’s Flandro

15th September 2017 - Author: Staff Writer

At the 2017 reinsurance conference Monte-Carlo press briefing, JLT Re’s David Flandro highlighted potential opportunities for greater levels of private capital to enter the Florida market, in light of hurricane Irma.

David Flandro, Global Head of Analytics at JLT Re, speaking at the reinsurance broker’s press briefing, said; “The thing to remember is that the low in Florida property-catastrophe risk-adjusted reinsurance rates was in the late 1990s, they spiked way up, actually before that with hurricane Andrew, and then spiked up again after that with hurricanes Katrina and Wilma.

“That created the political environment which made all those problems more acute, but that property catastrophe reinsurance rate online index is now only about 10-15 percent above where it was in the late 90s.

“So there’s an opportunity, actually, for reinsurers to enter the market with fairly actuarially sound rates, maybe even to make a profit, if rates firm a little bit, and to provide people with a private market solution, given where the market is now.

“The stars are kind of aligned, actually, for private capital to enter the market and for reinsurers to come in with a very good solution, where they weren’t the last couple of times we had these big catastrophes, so hopefully they’ll find a way because it would be better for everybody, but we’ll see,” said Flandro.

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The broker reminded that at the 2017 mid-year renewals, the JLT Re property catastrophe risk-adjusted rate online index went down by 5.1%, due to some big buyers coming in at the end and purchasing extra capacity at the same price which drove the rate online lower.

And while the broker said it’s too early to predict the impact of hurricane Irma on 2018 renewals; “It’ll have an effect, we’ve got a multi-tens-of-billion dollar event going through Florida that will change risk premia and risk perceptions in the area for at least one renewal, and it should have an effect next year,” said Flandro, adding that what the actual impact will be remains unclear.

“Last time this happened in Florida with hurricane Wilma, the sector’s capital was very significantly impaired in Florida after 2005, and that prompted the entry, and a bigger role for the local and federal government in Florida because there wasn’t enough private insurance capacity or the capacity that there was, was perceived as too expensive at that time, to be sustainable.

“Is this an opportunity for the sector to deploy private capital, into that government private market, if you will? Definitely on flood, maybe on some other areas, and we will be out there in the Florida market every single day trying to find those gaps,” said Flandro.

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