Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Florida – “The theatre is on fire,” FHCF change won’t solve it: RenRe CEO


Commenting on the potential for legislative reform in the challenged property insurance market of Florida, RenaissanceRe CEO Kevin O’Donnell remarked that a reduction in the FHCF attachment point will change nothing for his reinsurance firm’s view of risk in the state.

Kevin O'Donnell RenaissanceReSpeaking during the RenaissanceRe (RenRe) first-quarter 2022 earnings call, O’Donnell highlighted the dysfunctional Florida property insurance market, saying his company has lowered its appetite for underwriting reinsurance in the state.

“I don’t think I’ve ever successfully forecast what’s going to happen to the Florida legislature. I know it’s being discussed, in particular, the drop in the FHCF by the drop down in attachment.

“That doesn’t change, from RenRe’s perspective, that makes no change in what we do or how we’re looking at the market,” the CEO explained.

It’s an interesting comment when it now transpires that some primary carrier ceding companies operating in Florida are now waiting out the end of May special legislative session in the hope they can secure better reinsurance pricing after that.

A drop in the level of attachment of coverage from the Florida Hurricane Catastrophe Fund (FHCF) has been mooted as one of the reforms on the table, but as we’ve been explaining it is really the litigation and fraudulent claims crisis that Florida’s lawmakers need to solve, in order to get reinsurance capacity back into the state.

At one stage, RenRe was one of the biggest underwriters of Florida reinsurance programs, but in recent years the company has reduced its appetite in the state.

In advance of these renewals, RenRe explained in a report, “We continue to carefully monitor ongoing, adverse trends in the Florida market with respect to claims practices, litigation risks, and exposure growth, and are prepared to continue to reduce our exposure to risks and accounts exposed to these trends.”

During this week’s earnings call, RenRe CEO O’Donnell underscored this approach by saying, “With respect to Florida, even with rate increases, we are unlikely to increase offered limits at the June 1st renewal.

“Florida has a social inflation problem that can’t be solved by rate, because it is ultimately impossible to know how much to charge to cover fraud.”

Continuing to explain, “It now also has a capacity problem, due to reduced third-party capital appetite, limited retro availability, and severe financial distress at many domestic Florida insurers.”

That’s not to say RenRe wouldn’t be interested in writing more business in Florida. It would, but needs to see meaningful reform before it will deploy more of its reinsurance capital, or its partners third-party capital, there.

“We know this market well and could be substantially more interested in taking additional risk, if Florida’s long-term structural problems were addressed,” O’Donnell said. Adding that, “Over the last several years, we have steadily reduced our exposure to the Florida domestic homeowners’ market and it now represents about 2.5% of our gross written premium.”

As a result, while many still see Florida as a core state for their reinsurance books, for RenRe it is much less important that it used to be.

“Consequently, the ultimate outcome of the Florida renewal is of diminishing consequence to us, relative to several years ago,” O’Donnell said.

Thinking about the upcoming reinsurance renewals, RenRe will focus on improving the quality and performance of its US wind exposed book of business, O’Donnell said.

“Were not that interested in the Florida market, but we do have a lot of southeast Atlantic hurricane risk, which come in through different ways.

“We think we’re going to hold that relatively flat, but harvest more margin for the risks that we’re taking there,” the CEO said.

Referring to the mid-year renewals portfolio RenRe hopes to bind, O’Donnell said, “When I think about the overall construction of the portfolio, I’m delighted with the size, I’m delighted with the pricing prospects that we see on the construction of the portfolio, and the efficiency that we’re continuing to enhance in the overall returns in each of our vehicles.”

He went on to say that he is optimistic on catastrophe risks still, with “substantial new demand” coming to market and increased purchasing.

So, O’Donnell sees a “really accretive market for us to be bullish on” and expects RenRe will enhance its margins through the upcoming renewal season.

But moving back to the prospects for Florida, on which O’Donnell does not seem that hopeful for any meaningful change in the short-term.

“I think there’s a lot of problems in Florida,” he explained. “Solving it by a drop in the FHCF, I think is potentially releasing some short-term pain for the domestic carriers.”

But he added that, “I think the structural issues are my bigger concern and I think it’s hard to want to perform in that theatre when, at the end of the day, the theatre is on fire because of all the issues within the market.”

Read our coverage of Florida’s property insurance crisis below:

Swiss Re not optimistic on Florida reinsurance pricing: CFO Dacey.

To ensure progress in Florida reinsurers could pull capacity: Assured Research.

Full placement of Florida reinsurance programs to be challenging: AM Best.

Florida Governor sets property insurance special session for end of May.

“Cause for concern” as AOB & litigated claims rise in Florida: CaseGlide CEO.

FedNat downgraded, posing another threat to Florida’s insurance ecosystem.

Ida insolvencies continue, as Florida runs out of road: ALIRT.

Florida property insurance market “in collapse”, special session uncertain.

Florida renewal “one of the toughest in recent memory” – JMP Securities.

Policy growth means more cat bonds & reinsurance for Florida Citizens.

Florida Citizens seeks higher rate increases at upcoming hearing.

Lighthouse the first to lose Demotech rating, as Ida losses weigh.

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

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.

Florida insurers’ litigation exposure still of concern: CaseGlide CEO Todd.

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.

Artemis Live - ILS and reinsurance video interviews and podcastView all of our Artemis Live video interviews and subscribe to our podcast.

All of our Artemis Live insurance-linked securities (ILS), catastrophe bonds and reinsurance video content and video interviews can be accessed online.

Our Artemis Live podcast can be subscribed to using the typical podcast services providers, including Apple, Google, Spotify and more.

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.