Losses paid to Florida carriers quadruple in just three years

The losses paid by US-domiciled reinsurers to Florida personal property specialist insurers has soared in the past three years, increasing more than fourfold and topping $1 billion in 2021, despite the absence of significant hurricane activity.

This is according to AM Best, which has found Florida specialists continue to cede a growing amount of premium to reinsurers, reaching over $7 billion in 2021.

These specialist insurers are defined as regional insurers domiciled in Florida with predominant exposures to personal property insurance in the state.

Roughly 60% the premium ceded by this population is reinsured by US-domiciled companies, with more than half the remaining ceded to Bermuda.

Loss ratio spikes despite premium growth

Premium assumed by US (re)insurers has grown roughly 66% the last three years, and the loss ratio has still spiked despite moderate hurricane seasons, further suggesting that current prices are not adequate to cover the claims inflation and fraud in the market.

Consequently, reinsurers have been pulling back from the Florida property market or significantly raising prices.

“These events have led to a temporary reinsurance arrangement through Citizens Property Insurance Corporation being established,” said Jason Hopper, associate director, industry research and analytics.

“Given the surge in Citizens’ growth on a direct basis, and now with its role as a backstop reinsurer, Citizens’ reinsurers may also see additional risk.”

Eight reinsurers account for over 86% of premium ceded by Citizens, with the Florida Hurricane Catastrophe Fund accounting for nearly 44%.

Florida personal property companies report significantly elevated ratios related to their dependence on reinsurance, highlighting their sensitivity to reinsurance pricing.

Pricing will continue to impact business plans and companies’ ability to use reinsurance structures with adequate limits to protect against severe storms.