Commenting on the potential for legislative reform within the challenged property insurance coverage market of Florida, RenaissanceRe CEO Kevin O’Donnell remarked {that a} discount within the FHCF attachment level will change nothing for his reinsurance agency’s view of danger within the state.
Talking through the RenaissanceRe (RenRe) first-quarter 2022 earnings name, O’Donnell highlighted the dysfunctional Florida property insurance coverage market, saying his firm has lowered its urge for food for underwriting reinsurance within the state.
“I don’t assume I’ve ever efficiently forecast what’s going to occur to the Florida legislature. I do know it’s being mentioned, particularly, the drop within the FHCF by the drop down in attachment.
“That doesn’t change, from RenRe’s perspective, that makes no change in what we do or how we’re wanting on the market,” the CEO defined.
It’s an fascinating remark when it now transpires that some main service ceding corporations working in Florida at the moment are ready out the tip of Could particular legislative session within the hope they will safe higher reinsurance pricing after that.
A drop within the stage of attachment of protection from the Florida Hurricane Disaster Fund (FHCF) has been mooted as one of many reforms on the desk, however as we’ve been explaining it’s actually the litigation and fraudulent claims disaster that Florida’s lawmakers want to resolve, with a purpose to get reinsurance capability again into the state.
At one stage, RenRe was one of many largest underwriters of Florida reinsurance applications, however lately the corporate has lowered its urge for food within the state.
Prematurely of those renewals, RenRe defined in a report, “We proceed to rigorously monitor ongoing, adversarial traits within the Florida market with respect to claims practices, litigation dangers, and publicity development, and are ready to proceed to scale back our publicity to dangers and accounts uncovered to those traits.”
Throughout this week’s earnings name, RenRe CEO O’Donnell underscored this method by saying, “With respect to Florida, even with price will increase, we’re unlikely to extend provided limits on the June 1st renewal.
“Florida has a social inflation drawback that may’t be solved by price, as a result of it’s finally inconceivable to understand how a lot to cost to cowl fraud.”
Persevering with to elucidate, “It now additionally has a capability drawback, attributable to lowered third-party capital urge for food, restricted retro availability, and extreme monetary misery at many home Florida insurers.”
That’s to not say RenRe wouldn’t be excited by writing extra enterprise in Florida. It will, however must see significant reform earlier than it is going to deploy extra of its reinsurance capital, or its companions third-party capital, there.
“We all know this market nicely and could possibly be considerably extra excited by taking extra danger, if Florida’s long-term structural issues had been addressed,” O’Donnell mentioned. Including that, “Over the past a number of years, we’ve got steadily lowered our publicity to the Florida home householders’ market and it now represents about 2.5% of our gross written premium.”
Because of this, whereas many nonetheless see Florida as a core state for his or her reinsurance books, for RenRe it’s a lot much less necessary that it was once.
“Consequently, the final word end result of the Florida renewal is of diminishing consequence to us, relative to a number of years in the past,” O’Donnell mentioned.
Occupied with the upcoming reinsurance renewals, RenRe will concentrate on enhancing the standard and efficiency of its US wind uncovered e book of enterprise, O’Donnell mentioned.
“Weren’t that within the Florida market, however we do have lots of southeast Atlantic hurricane danger, which are available via alternative ways.
“We expect we’re going to carry that comparatively flat, however harvest extra margin for the dangers that we’re taking there,” the CEO mentioned.
Referring to the mid-year renewals portfolio RenRe hopes to bind, O’Donnell mentioned, “Once I take into consideration the general development of the portfolio, I’m delighted with the dimensions, I’m delighted with the pricing prospects that we see on the development of the portfolio, and the effectivity that we’re persevering with to boost within the total returns in every of our automobiles.”
He went on to say that he’s optimistic on disaster dangers nonetheless, with “substantial new demand” coming to market and elevated buying.
So, O’Donnell sees a “actually accretive marketplace for us to be bullish on” and expects RenRe will improve its margins via the upcoming renewal season.
However shifting again to the prospects for Florida, on which O’Donnell doesn’t appear that longing for any significant change within the short-term.
“I believe there’s lots of issues in Florida,” he defined. “Fixing it by a drop within the FHCF, I believe is doubtlessly releasing some short-term ache for the home carriers.”
However he added that, “I believe the structural points are my greater concern and I believe it’s arduous to wish to carry out in that theatre when, on the finish of the day, the theatre is on fireplace due to all the problems inside the market.”
Learn our protection of Florida’s property insurance coverage disaster under:
Swiss Re not optimistic on Florida reinsurance pricing: CFO Dacey.
To make sure progress in Florida reinsurers might pull capability: Assured Analysis.
Full placement of Florida reinsurance applications to be difficult: AM Finest.
Florida Governor units property insurance coverage particular session for finish of Could.
“Trigger for concern” as AOB & litigated claims rise in Florida: CaseGlide CEO.
FedNat downgraded, posing one other risk to Florida’s insurance coverage ecosystem.
Ida insolvencies proceed, as Florida runs out of street: ALIRT.
Florida property insurance coverage market “in collapse”, particular session unsure.
Florida renewal “one of many hardest in current reminiscence” – JMP Securities.
Coverage development means extra cat bonds & reinsurance for Florida Residents.
Florida Residents seeks greater price will increase at upcoming listening to.
Lighthouse the primary to lose Demotech score, as Ida losses weigh.
AIG’s Lexington pulls-back in Florida, elevating questions on E&S market.
AM Finest cites Florida market challenges because it downgrades Florida Farm Bureau.
Demotech requires Florida market reform with score downgrades seemingly.
Florida Residents targets “the very best deal we are able to get” on danger switch: Montero.
Florida insurers’ litigation publicity nonetheless of concern: CaseGlide CEO Todd.
No fast repair as Florida property insurance coverage reforms fail to move.
One other one bites the mud – Florida’s insurance coverage failures proceed.
Florida P&C claims litigation regarding, as instances soar: CaseGlide CEO Todd.
Florida P&C price filings present reinsurance firming must proceed.
Project of profit (AOB) claims rising for Florida P&C insurers.
