Florida market “unsustainable”, reinsurance rates to increase in 2022: Citizens CEO

Florida’s homeowners insurance market is experiencing “unsutainable” conditions and the consistency of loss across the marketplace is seen as “staggering”, according to the CEO of Florida’s Citizens Property Insurance Corporation Barry Gilway.

Speaking in front of a Florida House subcommittee on Insurance and Banking this week, Florida Citizens CEO Gilway said that already the early indications are that reinsurance rates in Florida will rise again at the renewals in 2022.

As we explained earlier this month, Florida Citizens continues to see rapidly increasing policy counts as ongoing challenges in the private market drive policyholders back to the residual market.

This is driving expanding exposure levels at the insurer of last resort, which is putting depopulation, or takeouts, back in focus, as well as likely driving a need for more reinsurance protection buying, which could include catastrophe bonds.

According to the Tampa Bay Times, Gilway, in his presentation to the subcommittee, highlighted a “sea of red ink” across the Florida homeowners property insurance marketplace.

Which is driving the need for much higher rates across property insurance carriers.

“The consistency of loss across the entire marketplace is absolutely staggering,” Gilway said. “It’s not a decision that one or two companies are making. The reality is that what is occurring in the marketplace is impacting every single company in the market.”

With a forecast of reaching over 1 million policies assumed again next year, Gilway is acutely aware of the need for Florida Citizens to have access to sufficient efficient reinsurance capital.

But with loss levels high in Florida still and global catastrophe losses also running well above average in 2021, Citizens CEO is also aware reinsurance rates are likely to continue rising as well.

Private insurers have had to reduce the amount of coverage they can offer, on dwindling surplus and higher catastrophe losses, resulting in Citizens taking on a growing share of the Florida property insurance market again.

Higher reinsurance costs have also been a factor in the ability of some homeowners insurers in Florida to write as much business, as their expenses have soared.

Looking to next year, through 2022, Gilway’s presentation explained that reinsurance rate increases of up to 10% are expected in Florida, with most insurers in the +5% to +10% range.

However, he expects Citizens rates to be between flat to +5% in 2022 and he noted that overall US property catastrophe reinsurance pricing is only back at levels seen around 2013, so not yet back at the highs seen over a decade ago.

Gilway said that the way the market structures its rates is not sustainable and said Citizens rates are now falling behind, as private insurers ramp up their own rates and pricing.

Florida’s property insurance market continues to face significant challenges and while there has been some evidence of litigation rates dropping slightly in the summer months, which may be as a result of recent legislative changes in the state, it’s expected the growth of Citizens will continue and drive a need for faster depopulation and more reinsurance protection.