Florida is considered ground-zero for global property catastrophe risk given its exposure to hurricanes and the significant insured values-at-risk.
As a result, the Florida market is effectively ground-zero for the catastrophe bond and insurance-linked securities (ILS) market, with a significant proportion of ILS market exposure linked to catastrophes that might occur in the state.
Florida’s property insurance marketplace is also known to have faced significant challenges, not just from losses, but with the just as real threat and impact of social inflation and litigation that have driven claims costs higher and ultimately raised insurance pricing. This has had a knock-on effect on reinsurance and ILS pricing for risks in Florida.
Tenax Capital, the London based asset manager that operates a UCITS cat bond strategy, considers Florida exposed catastrophe bonds more attractive now, seeing improvements in the insurance environment there and an excess spread available for its allocations, compared to cat bonds for certain other regions.
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Over the last few years, there has been a significant shift in sentiment among mainstream media and politicians, who cite the cost of reinsurance coverage as a key driver of the escalating cost of property insurance in the United States and nowhere has this been more apparent than in Florida.
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American Coastal Insurance Company (AmCoastal) has successfully renewed its all other perils reinsurance arrangement for 2025 and added a new $40 million catastrophe aggregate excess of loss agreement.
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Florida’s Citizens Property Insurance Corporation, the state’s insurer of last resort, said that it is encouraged as its policy count falls below 1 million or the first time in two years, with encouraging signs being seen in Florida property insurance market dynamics.
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Giving an outlook for reinsurance renewals in 2025, Kevin O’Donnell, CEO of RenaissanceRe, explained last week that he anticipates retentions will remain around the levels they have been reset to, while rates will trade around current levels, despite an expectation of around $10 billion of incremental property catastrophe demand.
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While lawsuits against insurers in Florida are said to have declined again across the first three quarters of 2024, the claims environment following hurricane Milton is expected to provide a “true test” for the legislative reforms that were enacted to reduce the litigious property insurance environment in the state.
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The latest data reported by the U.S. Federal Emergency Management Agency (FEMA) states that across hurricanes Debby, Helene and the most recent Milton, more than 72,000 National Flood Insurance Program (NFIP) claims have been filed so far.
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The insurance and reinsurance businesses of Warren Buffett’s Berkshire Hathaway suffered from hurricane losses in the third-quarter with Helene and are expecting up to $1.5 billion of additional losses from hurricane Milton in the fourth-quarter.
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The depopulation of Citizens Property Insurance Corporation, Florida’s state-backed insurance company, continues apace and HCI Group, the Florida-focused insurance holding company, has assumed another more than 42,000 policies from the residual market carrier.
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HCI Group, the Florida-focused insurance holding company, said it expects to pay between $600 million and $750 million in claims for hurricanes Debby, Helene and Milton, but net retained losses from the three events could be as low as $185 million.
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