Best’s Market Segment Report: Florida Property Insurance Market Improves; Reinsurance Dependency Remains High

OLDWICK, N.J.--(BUSINESS WIRE)--Higher homeowners’ premiums, a decline in legal costs related to recent legislative efforts and the ongoing de-population of the state-backed insurer of last resort are the backdrop as Florida’s property insurance market churns toward another hurricane season, according to a new AM Best report.

Given the more frequent and severe weather-related losses in recent years, as well as the inflationary impact on losses, Florida-focused personal property insurers have experienced material volatility in their operating results and surplus levels coupled with a reinsurance dependency that skews higher than the broader overall property segment, according to the new Best’s Market Segment Report. All that said, results improved in 2023.

The analysis within the report is focused on the aggregated results of Florida specialist insurers, identified by AM Best, that predominantly underwrite personal property in Florida, and excludes companies with ties to larger national carriers, as well as Citizens Property Insurance Corporation.

Florida insurers have faced an uphill battle with a hard reinsurance market in recent years. Reinsurers have incurred considerable weather-related losses and rising claims severity brought on by social and economic inflation. “In response, reinsurance carriers increased rates, reduced capacity, and pushed for higher retentions, and in some cases, sought lower limits to protect their financial positions,” said Josie Novak, financial analyst, AM Best.

To keep pace with rising reinsurance costs, primary carriers have had to push considerable rate increases onto policyholders, leading to direct premiums written increasing dramatically. The report includes an analysis of ceded reinsurance premium, which is a key industry measure of a primary insurers’ dependence on reinsurance. These active Florida specialists, in the aggregate, have a much higher reinsurance dependency with ceded reinsurance leverage of 514.7%, compared with the AM Best personal property composite average of 59.1%. While some of these primary insurers use reinsurance arrangements to generate income strategically through ceding commissions, a considerably high level of dependency can indicate greater sensitivity to changes in reinsurance pricing and availability.

The report also addresses the departure of carriers from Florida, which has contributed in part to the overall significant growth at state-run Citizens Property Insurance Corporation. Citizens has more than doubled its policy counts in the last two years, topping 1.4 million in September 2023. “With such exposure, a major loss event in the most hurricane-prone state may deplete Citizen’s surplus and strain its financial stability which could have a widespread market impact if severe enough,” said Christopher Draghi, director, A M Best.

To access this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=343191.

Novak will join AM Best Associate Director Dawn Walker and two other industry experts, Guy Carpenter Managing Director Randy Fuller and Dave Newell, vice president of membership & industry relations, Florida Association of Independent Agents, to discuss the discuss the Florida market ahead of hurricane season during a complimentary market briefing scheduled for Thursday, May 30, 2024, at 2 p.m. (EDT). To register, or for more information, please go to the event and registration page.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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