According to Chris Dittman, Head of Florida Strategy for Aon’s Reinsurance Solutions, the state’s reinsurance market is in a period of uncertainty as macroeconomic volatility and changing loss trends alter the supply and demand dynamic, however, he suggests there are still opportunities to achieve favourable outcomes at the upcoming renewals.
In terms of Florida’s market opportunities, Dittman states that there is a real issue with the availability of reinsurance capacity below the Florida Hurricane CAT Fund.
At the same time, surplus levels of insurance carriers are decreasing due to poor underwriting results driven mainly by litigation, which he suggests is creating a severely capital-deficient Florida marketplace.
Dittman adds, “When we drill down to Florida, given it is the peak CAT risk in the world, the supply and demand imbalance is exacerbated. The availability of reinsurance capacity is moving further away from loss as reinsurers struggle to identify the true loss costs.
“As we look forward to the 6/1 renewal time, we must keep a sharp eye on the 1/1 renewals. Retro capacity is extremely tight and will likely limit how much risk reinsurers can hedge in 2023.
“Additional reinsurance capital is using the “wait and see” approach; if projected pricing and terms for the 1/1 renewals truly hold and the Florida legislative special session next week provides meaningful changes, we will likely see some new capital start to slowly become available for 6/1 renewals.”
Dittman explains that optimism is high for the upcoming legislative session, adding that if the market perceives a positive outcome and capital slowly comes into the market for 6/1 renewals, this will alleviate some of the stress on the property CAT reinsurance programs for Florida insurance carriers.
Further, he anticipates that a change in the one-way attorney statute will stabilise overall loss costs going forward for Florida insurance carriers.
In turn, the impact of this will go a long way to stabilise the Florida insurance market in the long run.
Dittman concludes, “Differentiation and transparency are critical. Clients that listen to reinsurer concerns and tell a granular story will secure capacity at the best available terms and conditions. All parties at renewal will need to be flexible and pragmatic.
“Insurers will need to anticipate how changes in the market will affect their programs and keep an open mind to alternative solutions and sources of capacity. Aon is working hard to create additional capacity and ensure that reinsurers can support our clients to the fullest, by addressing uncertainties like inflation and secondary perils head-on.”
