Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Hurricane Ian to add reinsurance rate momentum, disrupt Florida market: KBW

Share

While too early for accurate loss estimates, analysts at KBW have said that they expect hurricane Ian’s catastrophic impacts will provide further fuel under property catastrophe reinsurance rate momentum, while also further disrupting the Florida insurance marketplace.

welcome-to-florida-miami-night-signThe analysts noted that the shift south of Tampa region before landfall may have reduced the eventual insurance and reinsurance market loss quantum somewhat.

But the industry loss is still expected to be “very significant” the analyst team from KBW said.

As we’ve explained, $20 billion seems to be a lower-bound for loss estimates now, given the massive damage experienced in Florida, although it is still very early and there will be a significant amount of losses that go uninsured due to being flood related and from the very high storm surge.

Although it is worth noting there are some estimates doing the rounds at levels that are unprecedented now, above $50 billion. As ever, it is hard to know what is an accurate place to begin, so still $20 billion and upwards seems a safe starting point, but it does feel like it will settle somewhere a lot higher now.

So, the impact to insurance, reinsurance and ILS markets is expected to be particularly significant, perhaps even unprecedented.

This led KBW’s analysts to say that, “We expect Ian to add momentum to 2023 property catastrophe reinsurance rate increases,” which they said means they remain broadly positive on the Bermudian insurance and reinsurance cohort as a group set to benefit from continued market hardening.

This reads across positively for the ILS market as well, with an opportunity to add further rate increases at renewals almost assured for the January 2023 renewal season.

However, the problem for some ILS funds will be all to do with trapped capital again, as deployable ILS capital for January 2023 may decline again, on the back of hurricane Ian.

The other point KBW’s analysts made that is worth reiterating, is that hurricane Ian will add pressure in the already challenged Florida market.

Right now, all thoughts for Florida must be on the lives affected and the recovery from hurricane Ian.

But, given the dysfunction of Florida’s property insurance marketplace, it seems highly likely this will only get worse and that a challenging few years of claims and loss amplification could be ahead after hurricane Ian, with ramifications for reinsurance and ILS capital.

It may take years for the final loss quantum to be understood, as we have seen with hurricane Irma, while loss creep may be an issue that erodes, or traps, reinsurance and ILS capital over consecutive renewal cycles, as we saw with that storm in Florida.

Hurricane Ian will likely “further disrupt Florida’s already-challenged property insurance marketplace” KBW’s analysts said.

We think this can’t be underestimated, as Florida’s market was on the brink, with many carriers very thinly capitalised and with smaller than desired reinsurance towers, all of which could result in more failures and even more pressure, as well as rate rises for Floridians.

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

Artemis London 2022 - Insurance-linked securities conference in London

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.