Key Insurance Piece Improves — At a Price

Key Insurance Piece Improves — At a Price

By Jim Saunders, The News Service of Florida

TALLAHASSEE — The market for reinsurance — a critical piece of Florida’s property-insurance system — is improving. But it comes at a price.

Those are takeaways from new reports as Florida insurers try to bounce back after two years of homeowners losing policies and facing major rate increases because of financial troubles in the industry.

Reinsurance, which is essentially insurance for insurers, helps drive the catastrophe-prone Florida insurance system. When the market for reinsurance is tight and costly, the effects trickle down to homeowners’ policies.

But the new reports indicate reinsurance has been available this year for Florida insurers during a critical period in June and July when many reinsurance contracts are renewed. The rub? Reinsurance prices are up.

A report released by the reinsurance broker Aon included a subtitle that said, “Florida: Challenging market turns a corner.”

“The 2023 mid-year renewal was orderly for Florida-domiciled insurers, which are heavily reliant on reinsurance to trade and meet solvency and ratings requirements,” the report said. “Despite concerns post Hurricane Ian of a potential capacity crunch for Floridian insurers, catastrophe reinsurance capacity was available at mid-year, at a price.”

Similarly, a report by Gallagher Re, another reinsurance broker, said: “Overall, there was sufficient supply to clear renewals, albeit at meaningful price increases compounding over multiple years.”

The Insurance Journal reported on the Aon and Gallagher Re reports last week.

Property insurers buy reinsurance and a type of financial instrument known as catastrophe bonds to hedge against risks. Being able to offload a portion of risk is vital for insurers in situations such as last year’s Hurricane Ian, which caused tens of billions of dollars in insured losses.

But while many homeowners might not realize it, the costs of what is known as “risk transfer” get baked into their insurance premiums.

A report slated to go before the Citizens Property Insurance Corp. Board of Governors on Wednesday said “risk transfer pricing is up for the year with most Florida carriers experiencing rate increases of approximately 30%-50%, while pricing indications for non-Florida risk is up 10%-20%.”

The report said the state-backed Citizens, which is Florida’s largest property insurer, plans to spend $650 million this year for its risk-transfer program, which would provide $5.38 billion in coverage.

Insurers rely on a combination of reinsurance bought in the private market and from the state-run Florida Hurricane Catastrophe Fund, which can provide the coverage at a relatively low cost.

With the property-insurance market crumbling in May 2022 — before Ian hit Southwest Florida — lawmakers agreed to spend $2 billion in tax dollars to temporarily provide additional reinsurance coverage to insurers. They followed up in December by approving a program that effectively offered additional levels, known as “layers,” of reinsurance funded through $1 billion in state tax dollars and premiums paid by insurers.

But the new reports indicate that other changes made by lawmakers, including a series of steps aimed at limiting lawsuits against insurers, have helped make Florida more appealing to reinsurers.

“Florida’s recently implemented tort reform package, which seeks to address abuses of the legal system, is perhaps the most significant action taken so far to stabilize Florida’s insurance market,” the Aon report said. “Prior accident year results remain a challenge, but as the full benefits of tort reform materialize, the supply of property insurance in Florida should increase. Combined with improved terms and conditions, the reform should also help attract additional reinsurance capacity to the state going forward.”

4 Responses to "Key Insurance Piece Improves — At a Price"

  1. @Pat – You rise a bit before me, but not a lot. I shun the local news and when 6:00 rolls around I generally have Steve Gruber on the tube.

    Some years back I was sued by a former tenant. The tenant had lied on the rental app, couldn’t pay the rent and was 3 months in arears on the utility payments when the eviction took effect. The tenant had lied to the eviction judge, had the property inspected by 2 city agencies that contradicted the claims as to the state of the property, lied about the injury, lied to attorneys on both sides, and lied during the sworn deposition, making it perjury. The attorney repeated the lie, should have known it to be untrue and when confronted (by my attorney) back pedaled a bit, but never resolved the lie(s) or perjury with his client.

    I tried to go after the attorney fraud, but he was so well known in town that nobody would touch it. Even attorneys that were specifically recommended for their willingness to sue other attorneys wanted no part of it.

  2. @ A Skeptic.

    I get up daily at 5:30, Watch “The National News Desk” news then suffer through an hour of WCTV’s morning news. WCTV exemplifies what is wrong with Identity politics. How hard can it be to read a teleprompter? If the morning crew is any indication, it must be tough. If not impossible. The only person I want to hear from is “Smoke-a-bowl-la with Rob Nucatola” and his best guess for today’s weather. Of course, that comes with a bombardment of slip and fall attorneys telling Tallahassee how your crash is the “million dollar wound” (reference to Viet Nam). This is how naive the typical resident in Tallahassee is. They still wear a mask mostly around their chin. And they believe that when “Kimmie” calls to update them on their insurance claim because she cares.

    Kimmie doesn’t give a Rat”s A$$ about you. She cares about her billing. She cares about paying off her student loans. She cares about making partner. Each call is billed out in 6 minutes increments. Ask her about how she is doing in the hot weather, $300.00 an hour. Ask her if she has been to the beach lately, $300.00 per hour. You are better off calling a 900 number for a fraction of the cost.

    This city has a huge Black Crime problem that no elected official wants to admit. And litigation attorneys are thriving. It was great growing up here in 1972 thru 1977. If you didn’t work, you didn’t eat. Then, if you broke the law, you went to jail.

    I’ve been retired 13 years. My insurance premiums, my property taxes, my car insurance, my medical insurance premiums and my, thanks to Bidenomics, my grocery bill and light bill are through the roof. But still, I am living within my means.

    Today, I saw Havana’s first homeless dude making his Fort on the porch of a closed business. The Gadsden Co. Sheriff’s office said, too bad so sad. Nothing we can do. Squatters got rights.

    Good luck Tallahassee…you are going to need it.

  3. @Pat. I’m of the opinion that there should be an open season on slip-and-fall attorneys. They’re bottom feeding scum that do more harm than good.

    I used to get a kick out of the Morgan & Morgan ads, back when they bragged about how much they had recovered for their clients. For a brief time they promoted a number near $10 billion. I guess they figured the listening public wasn’t smart enough to multiply by .4 and realize that Morgan’s company had “made” about $4,000,000,000. They had “recovered” $10B, and kept $4B “that was due their clients”. And the kick in the gut is that every dollar of that came from insurance premiums.

    That’s just ONE slip-and-fall firm….

  4. Slip and fall attorneys are a major contributor to constantly increasing insurance premiums. Farmers Insurance just announced it is pulling out of Florida.

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