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Florida homeowners market still in “free fall” – ALIRT

 26th July 2022 – Author: Pete Carvill

The Florida homeowners insurance markets remain in ‘a sort of free fall’, says a new note from ALIRT Insurance Research.

The note, an update on the domestic insurer market in the US state, says that a number of factors are buttressing the ongoing narrative that is the market’s decline in recent years.

Amongst these are comments from Barry Gilway, CEO and president of Citizen, saying that three-quarters of the market was probably shutdown; the downgrading and placing into run-off of the Capacity Insurance Company; the announcement from United Insurance Holdings that it was looking at a sale or merger; the departure from Tower Hill of president Don Matz; and the FedNat Holding Company saying it had sold a majority stake of Monarch National Insurance Company.

The authors of the report wrote: “As in a Thomas Pynchon novel, all of these apparent odds and ends do ultimately contribute to a coherent narrative, which in this case is that the Florida homeowners insurance market remains in a sort of free fall, with a number of once substantial players sounding a more urgent retreat.”

It added: “The FedNat Holding Company and United Insurance Holdings announcements only serve to remind us that no capital structure remains immune in this difficult market, with most of publicly traded cohort seeing price drops of well over 50% since year end 2017 (with 3 of these groups reporting drops of over 85%).

In May, Florida governor Ron DeSantis signed new legislation into law that seeks to stabilise the troubled property re/insurance market in the state, following a week of discussions by lawmakers at a special emergency session.

The reforms, which include a $2bn reinsurance fund and new rules on coverage denials and attorney fees, were signed by the Florida Governor after successfully passing the house.

They are designed to enact pro-consumer measures that help to alleviate rising insurance costs, increase insurance claim transparency, and crack down on frivolous lawsuits that have driven up prices in recent years.

Specific provisions include $2bn in reinsurance relief through the Reinsurance to Assist Policy (RAP) program to help policyholders over the next two years.

Other measures $150m for hurricane retrofitting, as well as rules that require insurers to provide a reasonable explanation for denying coverage, and that prohibit insurers from denying coverage based on factors such as the age of a home’s roof.

Despite the reforms, a majority of respondents to a recent survey by Reinsurance News have said they believe that it could take years for the recent property reforms passed by Florida lawmakers to have a positive impact on reinsurance conditions in the state.

Out of the hundreds of responses from identifiable market participants, of which 70% make or provide input to reinsurance buying decisions, 37.3% expect Florida market reforms to take one to two years to positively impact reinsurance, while another 16.0% said it will likely take more than two years.

Together, then, a significant 53.3% of respondents expect the changes to take at least a year and possibly multiple years to effect beneficial change for the state’s troubled market.

With just 10.7% of respondents saying reforms could yeild positive impacts within six months, this option was the least popular of those offered to survey participants, but it’s worth noting that more than a third (36.0%) were optimistic that positive change could be observed from six months a year after the reforms are introduced.

Among other key takeaways from the Reinsurance News survey, market participants expressed confidence that reinsurance rate increases will accelerate further at the mid-year 2022 renewals, while buyers of protection will find it challenging to procure the desired level of coverage.

On a similar note, 77% of respondents to the survey believe that some carriers will fail to obtain sufficient reinsurance protection on June 1, in part due to the ongoing challenging conditions in the Florida market.

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