Analysts at insurance research firm ALIRT warn that insurers in the Florida market face a “no-win situation” when they come to renew their reinsurance this year.
The company said that the rates of the upcoming June reinsurance renewal are estimated to increase by up to 50% and may result in severe capacity constraints, due to a significant reduction in the total capital of reinsurance in 2022.
This means that even if an insurer is able to secure its desired reinsurance limit on renewal, it may be greater than the company’s gross premium income, resulting in a negative net written premium, analysts explained.
But on the other hand, for insurers who cannot obtain or pay their desired reinsurance limit, companies can be left open to possible solvency threatening hurricane losses, if they are large enough to exhaust the protection of reinsurance earned.
“While the new legislative landscape for property insurers should address the non-catastrophic loss trend issues that have long weighed on this market, the current reinsurance landscape is somewhat bleak, ” explained ALIRT.
“While these domestic insurers in Florida are waiting for the insurance reforms in 2022 and early 2023 to act productively on the income statements (which may take longer due to a recent wave of lawsuit filed before the latest became effective in late March), they have to keep their fingers crossed for disaster — never a good strategy,” it continued.
“Given all of this, we see that the financial pressure on the Florida domestic insurer market is likely to continue.”
ALIRT also suggested that last year’s Hurricane Ian may have been ‘the camel’s back breaker’ in terms of its impact on the Florida reinsurance market.
Since reinsurers ended up absorbing a large portion of the $45-50 billion in insured catastrophe losses arising from this event, analysts believe Ian may have precipitated a capacity and rate crisis that already been given given outsized global cat loss of five. for the last six years.
“The current retrenchment of reinsurance capacity available in the Florida property market, and attendant spike in costs for that availability, is only partially tied to man-made legal and claims abuses.” contributed to years of poor underwriting results,” ALIRT concluded.
“Most important is the increase in larger and more frequent weather-related disasters that many now attribute to climate change. In short, Florida’s unique geographic exposure to hurricanes and other secondary weather events, rapid growth as a retirement/lifestyle/tax-haven destination (which drives up real estate values and prices), and suppression of actual good property insurance. rates, has proven to be a recipe for frequent (re)insurance losses.