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Capacity issues drive some Florida renewal rates 50%+ higher: Gallagher Re


Some of the rate increases seen at the just completed Florida focused reinsurance renewals were above 50%, as a lack of capacity and reduced reinsurer appetites challenged that marketplace, according to broker Gallagher Re.

florida-insurance-marketWhile the entire Florida reinsurance renewals market was severely dislocated this year, given the well-documented challenged state of many domestic market carriers, as well as the general de-risking efforts of some reinsurers, there were some particularly difficult placement situations that insurers and their brokers needed to deal with.

Gallagher Re explained that “The price and capacity available to Florida domestic placements was wide ranging and largely dependent on experience, portfolio footprint, and credit concerns.”

In particular, accessing new capacity was very difficult for cedents and in the main reinsurers “strongly preferred” to hold their lines in Florida, while showing limited appetite for incremental growth or expansion there.

Lower layer’s of reinsurance towers were particularly challenging to fill, while Reinstatement Premium Protections were “incredibly difficult to place,” the reinsurance broker said.

Some of the US nationwide carriers increased their limits purchased there, as inflation concerns helped to drive $4 billion in new limit purchased.

These reinsurance programs, which are typically perceived as higher-quality, saw reinsurers gravitating towards them, in favour of smaller domestic Florida carriers for whom many have credit concerns.

The special session of the Florida Senate and the property insurance reforms enacted there drew a mixed reaction, with Gallagher Re citing a “wait-and-see approach” on the litigation reforms, while the state’s new Reinsurance to Assist Programme (RAP) actually caused some placements at the renewal to stall, as reinsurers and brokers worked through the impacts of this new state-backed cover.

The end-result was a relatively late renewal, with many reinsurance placements only completed after June 1st this year.

Terms and conditions were refined, while items like limited peril coverage (named storms only), accelerated premiums, loaded reinstatements, special termination provisions, and broad offset clauses, were all adjusted and enforced.

There was also the perhaps less-typical visibility of parametric covers and index-triggers, as some carriers looked to fill out their reinsurance needs.

Gallagher Re said that parametrics and county specific index triggers were, “widely used on placements,
particularly to fill gaps at the lower end of programmes and behind captives.”

On pricing at the Florida reinsurance renewals, Gallagher Re cites a +15% to +35% change for catastrophe loss free renewals, but +20% to +50% for catastrophe loss hit reinsurance tower renewals.

For those cedents that achieved firm order terms on their renewals, but with insufficient coverage to fill every layer, Gallagher Re explained that shortfall pricing was often _30% to +50% above the FOT’s secured.

Read all of our reinsurance renewals news coverage here.

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