Fitch Ratings has observed that reinsurance demand was strong at the midyear 2024 renewals, particularly for higher catastrophe layers, as Florida property writers are seeking more protection with insured values increasing from inflation and exposure growth.
According to the rating agency’s most recent report on the matter, increased demand at the midyear renewals is also being driven by further take-outs from Citizens, including seven new Florida property insurers, with almost 300,000 policies transferred to the private market in 2023 and an equal amount expected in 2024.
Fitch additionally observed that the discontinuation of the Reinsurance to Assist Policyholders layer that Florida introduced in 2022 is boosting reinsurance demand.
Fitch continued, “Recent legislative and regulatory tort reforms enacted in Florida, in conjunction with a benign 2023 catastrophe loss activity, had a favourable impact on the financial performance of the Florida homeowners’ specialty market.
“As a result, demand for reinsurance coverage increased at the June/July 2024 renewals, as Florida property specialists gain confidence in their ability to profitably offer property insurance.
“However, the financial benefit of the reforms needs to be proven out over time before it could pressure meaningful declines in reinsurance pricing.”
Elsewhere in the report, Fitch noted that pricing is moderating at the midyear renewals, with risk-adjusted rates generally “flat to down slightly”.
This is reportedly in contrast to the 2023 renewal, when Florida property experienced 30%-40% rate rises for catastrophe loss hit business, reflecting the impact of Hurricane Ian in 2022.
The rating agency also said that terms and conditions are holding firm, with retentions steady and not moving back down to levels that provide earnings protection to cedents.
Fitch’s report went on, “Reinsurance and retrocession capacity to the Florida market are increasing from both traditional and ILS sources, including record issuances of catastrophe bonds, where spreads are at double-digits.
“This reflects favourable expected returns on property catastrophe risk following several rounds of price increases, including the market reset in pricing and terms and conditions experienced in 2023 post-Hurricane Ian.”
Though even with the added capacity, Fitch expects the reinsurance market to maintain its discipline and support rate adequacy as catastrophe risk remains high with climate change concerns.
