NEWS
AM Best underscores Florida worries
The rating agency has long-term concerns over the condition of the insurance market in the state.
The impact of Hurricane Ian is being watched carefully by AM Best, due to long-term concerns the rating agency has over the condition of the insurance market in Florida—a state that has seen multiple insolvencies as well as insurers withdrawing from it entirely.
“We’ve been concerned about the Florida market in terms of reinsurance and property catastrophe for some time now,” Robert Raber, director at AM Best, told APCIA Today. “We’re going to see how this particular event impacts renewal opportunities for the carriers there, and whether it’s going to impact pricing, or capacity.
“The Florida market has been in the news for the past 12 to 18 months regardless and now we have Hurricane Ian, that took a track we’ve almost been waiting for, across the state from the Gulf to the Atlantic coast, impacting not just Florida but also the Carolinas,” Raber said.
AM Best notes that insurers concentrated in Florida, or those writing at least 20 percent of gross written premium in the state, have been greatly affected by major hurricanes. The overall property loss ratio for this population spiked to 72 percent with Hurricane Irma in 2017 and was higher than 60 percent when Hurricane Michael hit a much less populated area in 2018.
In total, these hurricanes led to a drop of nearly 20 percent in policyholders’ surplus, limiting those insurers’ ability to cover future events.
Of the companies operating solely within Florida and writing at least $20 million in premium, more than 80 percent of that premium is in the homeowners or farm owners lines of business. Many of these insurers have high premium-to-surplus ratios and depend heavily on reinsurance, including the new state-run programme.
“The personal lines market has seen other challenging conditions.”
Robert Raber, AM Best
Raber added that there are other areas of the market that AM Best is watching carefully. “The personal lines market has seen other challenging conditions, with AM Best recently changing the outlook for personal lines from Stable to Negative,” he said.
“There are a lot of inflationary pressures there, cost pressures and social inflation—parts, labour and a lot of challenges from regulators as far as the ability to increase rates to offset that.
“The personal lines carriers have to work very hard to make sure they’re balancing rate filings and their rate actions with where they sit in the market and price-sensitivity.”
Raber was able to point to more positive news from other areas of the US re/insurance market.
“For the commercial markets, those are running very well, especially surplus lines,” he said. “They’ve had some ability to increase rates, not just surplus lines-specific, but other parts of the market.
“There’s a lot of demand—the economy has been healthy in the US for the most part, with new businesses coming online, and new and unique risks being dealt with by the surplus lines market.
“Many commercial carriers have been very straightforward and outright with their risk tolerances—the lines they want to write, the exposures they want to have. So that gives those companies a lot of opportunities in those markets,” he concluded.
Main image: Shutterstock / Felix Mizioznikov
