AIG’s Lexington pulls-back in Florida, raising questions on E&S market

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Lexington Insurance Company, the U.S. based surplus lines insurer arm of global player AIG, has reportedly announced a pull-back from Florida’s high-value homeowners insurance market, with plans to stop offering personal lines property coverage from August.

florida-insurance-marketLexington, being an excess and surplus (E&S) lines specialist, typically insures high-value homes, with values of $1 million and greater.

As a result, with the company announcing a pull-back to its agents last week, according to Florida’s Sun Sentinel, it signals a further challenge for the state of Florida’s property insurance market, as high-value properties cannot be accepted for coverage by Florida Citizens.

The Sun Sentinel notes that Lexington’s pull-back from underwriting new property policies in Florida may signal that the viability of the E&S market in the state is being affected by market conditions in just the same way as the lower-value residential property market.

Which is of course no surprise, as with P&C insurers challenged, seeing continued claims issues, inflation, litigation, higher reinsurance pricing and ongoing assignment of benefits (AOB) cases, this will naturally affect the writers of high-value homes as well.

While Lexington and parent AIG has been refocusing its high-value homes insurance offering after a few years of heavy catastrophe losses, the concern in Florida is that alternative options for property owners are becoming increasingly limited.

With the appetite for underwriting new business shrinking across Florida’s insurance carrier base, while legislative efforts to reform the property insurance market have stalled once again, those homeowners that lose coverage are facing costly moves to new carriers, or the alternative of self-insuring if they can afford that risk.

The E&S property market has historically been buoyant in Florida, but after the last five years of catastrophe losses and related challenges, it appears the state may be losing its attraction, at least at the levels rates are currently sitting at.

How does Florida’s property insurance market get fixed?

Legislative reform and higher (to significantly higher) rates appear the main precursors to a recovery, which should have the effect of attracting more capital back to the marketplace and also make reinsurance more affordable for the carriers.

Lexington and AIG’s moves in Florida are yet another data-point in advance of this year’s reinsurance renewals, that suggest the situation in the state may worsen before it gets better, absent a special legislative session and some reforms being enacted in the next few weeks.

Also read:

AM Best cites Florida market challenges as it downgrades Florida Farm Bureau.

Demotech calls for Florida market reform with rating downgrades likely.

Florida Citizens targets “the best deal we can get” on risk transfer: Montero.

No quick fix as Florida property insurance reforms fail to pass.

Another one bites the dust – Florida’s insurance failures continue.

Florida P&C claims litigation concerning, as cases soar: CaseGlide CEO Todd.

Florida P&C rate filings show reinsurance firming needs to continue.

Assignment of benefit (AOB) claims rising for Florida P&C insurers.

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