Pressure builds ahead of mid-year renewals

A lack of reinsurance capacity is putting pressure on some carriers ahead of the 1 July 2022 ‘mid-year’ renewals.

This is according to Applied Underwriters and its Centauri Insurance subsidiaries, which has affirmed its commitment to underwriting in the Gulf Coast markets.

“Most of the monoline Gulf carriers were not able to complete their catastrophe reinsurance treaties, including Citizens, and many have suffered financially in recent past years, making my overall outlook for the industry in the Gulf states generally not optimistic,” said Applied’s President, Jamie Sahara. 

“Hopefully, we will see minimal hurricane activity this year so that many of our peers can catch their breath.”

The carrier completed its reinsurance treaties early enough “to avoid capacity problems”, but other carriers have not been as lucky. Applied says its first priority is its renewal customers as “with so much demand, we only have so much capacity”.

Renew early, urges Applied

In a statement, it noted that the effects of recent carrier insolvencies, voluntary and involuntary moratoria imposed by some stressed carriers and insufficient or late reinsurance renewals by many carriers all threaten the market.

Monoline insurers are at highest risk of not having adequate reinsurance arrangements in place come mid-year.

Steve Menzies, chairman of Applied Underwriters, said: “The demand created by other insurers’ insolvencies and lack of adequate reinsurance financial backing is high, and our staff is meeting it efficiently, with an overall firm delivery commitment that will help sustain the market in the various states around the Gulf and serve our brokers and customers.

Sahara cited some added pressure on Applied as potential problems in the marketplace come to light among other insurers, stemming from a general lack of availability of catastrophe reinsurance coverages “at any price” and from insolvencies in 2021 that continue in 2022:

“We ask our agents to please understand that we’re going to have to moderate the flow of new business, and we recommend that they get their new business applications in as early as possible.”

Social inflation drives industry to ‘verge of collapse’

Menzies called the conflict between some states’ legislative positions and the efforts of insurers and the departments that regulate them as a key element of the stress on the entire system.

“Everyone involved in the provision of homeowners insurance works hard to keep the dikes from bursting even in the face of hurricanes and other catastrophic events, but invariably we find ourselves having to wrestle with state legislative measures that ceaselessly work to create a veritable bonanza for plaintiff’s lawyers.

”Legislatures are lobbied hard and wind up enabling predatory exploiters to extract billions from the system, profiting themselves but leaving the insurance market under extraordinary duress, even, to some degree, broken or, in some quarters, on the verge of collapse.

”Even all of the discipline and sophistication of Applied and its subsidiaries cannot perdure many more years of unjust awards and irrational, frivolous lawsuits. It is our hope that it ends soon and provides some additional strength to the market place. Our insureds in the Gulf states deserve better.”