The global reinsurance market could take “several years” to regain its confidence in Florida and appetite to underwrite more business there, as uncertainty remains over how effective recent property insurance reforms will be, according to analysts at KBW.
After a particularly challenging Florida reinsurance renewal at June 1st, that still continues for some as they look to fill out the rest of their towers, KBW’s analysts cautioned that the states issues with attracting reinsurance capital may not go away anytime soon.
Despite the reforms passed by legislators in recent weeks, many are suggesting more is required and urgently to stem the litigious environment in Florida’s property insurance sector.
However, some reinsurance executives are optimistic about the potential for the reforms to have a beneficial effect on the market.
The questions really are, how much of an effect and how soon will the benefits be felt by those deploying reinsurance capital into Florida.
But, with broad skepticism reported across the reinsurance market after the reforms were passed, several major reinsurers are still refusing to write business in the state and the challenges insurers face in gaining sufficient coverage remain.
KBW said that in discussing the market with its Bermuda contacts, one executive said they had seen reinsurers “renege” on signed deals for the first time in their nearly 50 year career.
The Bermudian reinsurance firms KBW analyses are “generally averse to assuming more Florida property catastrophe exposure,” the analyst team wrote.
But adding that, “The persistent capacity shortfall and accompanying rate increases should materially boost expected returns on the catastrophe reinsurance business that they do write.”
While more property insurance reform seems inevitable, as so many are stating that the reforms passed aren’t sufficient and won’t stem the tide of litigious claims in Florida, KBW’s analysts are hopeful.
“In the medium- to long-term, the Florida property market’s current distress could also drive litigation reform that could re-attract reinsurers to the state,” they explained.
But qualified this statement by writing, “But we expect it to take several years for the cohort to regain its confidence in the state.”
So Floridian insurers should not expect reinsurance rates to come down at any pace and the current hard market may persist, as we explained last week.
Florida’s insurance firms need access to efficient reinsurance capital at reasonable prices, in order to become more profitable.
This need is inly going to grow with the effects of climate change, it would seem, while the forecasts for an active hurricane season suggest further losses may not be far away for Florida’s insurance community, something that could harden the market even more.
As a result, lawmakers need to seriously consider whether they can fast-track additional reforms to help Florida’s insurance marker regain the confidence of global reinsurers and insurance-linked securities (ILS) investors.
Without them, the going may only get more challenging for carriers in the state and reinsurers may just get more risk averse to Florida catastrophe exposure.
Read our coverage of Florida’s property insurance crisis below:
Florida Citizens struggles to fill reinsurance towers, only ~36% secured so far.
Heritage says Florida needs “meaningful & necessary legislative changes”.
Southern Fidelity may wind-down after failing to secure reinsurance, losing rating.
Florida carriers reliant on reinsurance face “existential challenge” – AM Best.
ILS market no longer a “safety valve” for Florida’s reinsurance needs: Stonybrook.
Florida reinsurance renewals to see at least 20-30% rate rise: Analysts.
Florida property insurance legislation “inadequate”, says Demotech’s Petrelli.
Florida insurance reforms signed into law, uncertainty to persist.
Reforms won’t have immediate positive impact on reinsurance in Florida: Survey.
Florida property reforms pass House, but reinsurers to remain sceptical.
Florida insurance reforms pass Senate, but may not save all carriers.
Florida’s insurance carriers over-litigated, not under-capitalized: Demotech’s Petrelli.
Florida insurance bills pass first hurdle. But details to matter.
Florida: Some carriers are on life support, others about to pull the plug.
Florida’s special session property insurance reforms: Opportunity lost?
Florida Citizens CFO says risk transfer markets in “disarray”.
“Really significant” property insurance reforms for Florida: DeSantis.
Florida “flash point” as reinsurance market begins to throw in the towel: ALIRT.
FedNat details Florida downsizing plan, says Monarch to be acquired.
Florida Special Session to focus on fraud, AOB abuse & affordability: CFO Patronis.
More insurers seeking rate hikes of 23% to 49% in Florida.
Cat Fund reform is crumbs, Floridians need a feast: Demotech’s Petrelli.
Florida litigated claims rise again, but “hope” in Special Session: CaseGlide.
Florida – “The theatre is on fire,” FHCF change won’t solve it: RenRe CEO.
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.
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.
Demotech calls for Florida market reform with rating downgrades likely.
No quick fix as Florida property insurance reforms fail to pass.
Another one bites the dust – Florida’s insurance failures continue.
Assignment of benefit (AOB) claims rising for Florida P&C insurers.
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