Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Florida property cat renewals to come in below expectations: KBW


Renewals of property catastrophe reinsurance programs in Florida are expected to see their pricing come in below where expectations had been established last year, with mid-to-upper single digit rate increases expected, according to analysts.

June reinsurance renewalKeefe, Bruyette & Woods (KBW’s) analyst team have spoken with Florida insurance carriers and Bermuda reinsurance players to discuss views on the rapidly approaching June 1st renewals, where much of the Florida property catastrophe programs are placed.

The overall view of the executives KBW met with is that Florida property catastrophe reinsurance rate increases are set to be below the levels that had been expected, but still positive.

It confirms our own sources, who as we explained last week are anticipating the June 1st reinsurance renewals in Florida will see broad rate increases of between 5% to 15%, but lower than where expectations had been sitting a few months ago.

Loss free property catastrophe reinsurance programs are coming in at the mid-to-upper digit range, in terms of rate increases, while loss-impacted accounts are set for bigger increases in general.

Overall, the June reinsurance renewals are seen to be orderly, with adequate capacity ensuring buyers can, in the main, secure the coverage they need without too many challenges.

Some of the market participants the analysts spoke with believed overall capacity for the renewals is slightly down, some up, so the broad view appears to be for a relatively flat level of reinsurance capacity to be available, which has likely helped to hold up pricing somewhat.

The attraction of catastrophe bonds and also industry-loss warranty (ILW) products may be helping here, as capital market investors and ILS funds have switched their focus more onto the named peril, more predictable ILS products around this renewal, driving the year-on-year softening seen in those markets.

The fact rate increases aren’t as high as anticipated in Florida at this renewal is deemed partly down to reduced demand, as primary insurers have been shrinking their books of business as their surplus has been hit following years of poor results.

Florida Citizens has kept growing though, taking on policies from affected primary insurers.

Another round of approvals for Florida primary insurers to shed policies, which inevitably head back to Citizens, was given just in recent days, with Universal Insurance Company of North America to cancel 13,294 personal residential policies, Gulfstream approved to cancel 20,000 personal residential policies and Southern Fidelity approved to cancel 2,300 policies in the next 45 days and 19,600 over the next 14 months.

At the same time Florida’s primary insurance rates continue to rise, which will also be a factor helping reinsurers to continue pushing higher pricing, even if the increases aren’t as high as had been hoped.

On other lines of reinsurance business, KBW says that management teams are largely optimistic about price adequacy and the analysts sum this up as “continuing (albeit modestly decelerating) rate increases that compound recent years’ increases.”

The analysts summarised, “Most insurers expect persistent concerns about elevated property and casualty loss cost inflation and emerging reserve challenges — relating to COVID or to broader casualty lines’ under-reserving — to sustain rate increases throughout and beyond 2022, although several executives noted (we somewhat sadly agree) that eventually, actual soft pricing will re-emerge.”

Also read:

Industry-loss warranty (ILW) market softens YoY as capacity rises.

Florida reinsurance renewal terms key, as rate expectations falter.

Florida a “different animal” where demand will be less: Guy Carp CEO Hearn.

Register today for ILS NYC 2023, our next insurance-linked securities (ILS) market conference. Held in New York City, February 10th, 2023.

Artemis ILS NYC 2023 - Insurance-linked securities conference in New York City

Get a ticket soon to ensure you can attend. Secure your place at the event here!

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.