The property insurance market in Florida is still a long way from becoming a stable environment in which carriers can operate, but there are signs that an inflection point has now been reached, suggesting insurance in Florida is on the path to greater normalcy, according to ALIRT Insurance Research.
The latest analytical report from ALIRT Insurance Research Director David Paul covers residual insurance market trends seen in higher catastrophe risk states, which of course includes Florida.
In general, the states of Florida, California, Texas, and Louisiana are considered to be among the least functional, but also the most exposed to disaster risk and ultimately climate change, driving the need for state-backed solutions, hence the existence of the residual market in each.
Of course, there are issues far beyond disaster and weather-related risks that affect each of them equally, such as the disputed claims crisis in Florida and rules in California that prevented insurers from pricing risk as adequately as they deemed necessary.
Which have added to the flow of insurance policies to residual markets, which in Florida has led to the significant growth of Citizens Property Insurance Corporation in recent years.
But David Paul of ALIRT Insurance Research seems to be getting more positive on Florida’s outlook, while stressing that there’s still a long way to go.
Once again, the ability of the reinsurance market to meet Florida’s needs is a key driver of the improving outlook, Paul believes.
ALIRT has previously highlighted the important role of catastrophe reinsurance for Florida-focused property insurers, after saying that Hurricane Ian of 2022 could have been the death knell for many of them had it not been for the support they received from their catastrophe reinsurance agreements.
Now, after the mid-2023 renewals, ALIRT again cites the reinsurance market’s response to Florida’s predicament as key to its recovery.
While citing the “trenchment of global reinsurance markets” as their operating returns have failed to overcome obstacles in recent years, ALIRT’s Paul seems pleased with how the market has approached June renewals for Florida.
“They say the night is darkest just before dawn and there have been bright spots lately for the citizens of Florida and the state property insurance market as a whole,” says Paul.
Going on to write that “fears that reinsurance capacity would further evaporate at the critical 6/30 renewal period proved unfounded, as much higher rates (along with more restrictive terms and higher attachment points) drew new reinsurance capital into the market.
This is the number one reason for the improved outlook for the property insurance market in Florida, according to Paul and ALIRT.
The second is the fact “that a number of new insurers have announced their intention to enter the market”.
Here, ALIRT cites Tower Hill Reciprocal Insurance Exchange, Vyrd Insurance Company, Slide Insurance Company and Loggerhead Reciprocal Insurance Exchange, founded in 2021-2022, while HCI Group also launches Tailrow Insurance Company.
Additionally, ALIRT highlights one of the rumored start-ups, Village Protection Insurance, reportedly seeking capital for a 2024 launch in the Florida property insurance market.
The improving legislative environment is, of course, driving this renewed interest, as voters hope that legislation enacted about last year will begin to prove itself, reducing some of the problems that Florida property insurers have faced.
This has been enough to attract new capital to the reinsurance and insurance-related securities (ILS) side, while also attracting equity capital to enter new Florida-focused insurer start-ups.
We’ve heard additional rumors about a major sovereign funder for a new Florida carrier, but we haven’t gotten any specifics on that yet.
But there are clear signs that the appetite is returning, although on the reinsurance and ILS fronts it is only returning to much higher pegs and with much tighter coverage conditions.
ALIRT also cites State Farm’s statement that it intends to maintain a “substantial presence” in Florida homeowners’ business, given market reforms it finds encouraging.
Finally, ALIRT also cites the growing appetite for the depopulation process among Florida citizens, which, as we recently reported, is beginning to accelerate.
The predicted “no-win situation” manifested itself during June reinsurance renewals for Florida players, but it appears most were prepared for this and accepted the costs and terms of their reinsurance coverage, recognizing the need to work with reinsurers and ILS funds to achieve an outcome that enables futures trading, while waiting for the effects of legislative reforms to become more evident.
Leading Paul of ALIRT Insurance Research to summarise, “While the Florida property insurance market still has a long way to go to regain some semblance of normalcy, the actions above provide evidence that it may be at a significant inflection point.”
Read all our news and analysis on the insurance and reinsurance market in Florida.