Ratings chief makes the case
Another person who really knows about Florida’s property insurance market is Joe Petrelli. He’s President and Co-Founder of Demotech, a financial analysis and actuarial services firm that rates 42 insurance carriers that focus on Florida’s residential market. These “domestics” as they’re known, write about two-thirds of all residential property insurance in the Sunshine State. Joe is worried, just like Tasha.
He and his team have spent the past couple of months reviewing the financials of these insurance companies, trying to determine if the cash infusion that many of them took in 2020 has provided the needed fortification to be healthy enough to earn Demotech’s ongoing Financial Stability Rating (FSR). More on that in a minute. During the review, Joe sat down with the top brass of these companies for a frank discussion of the market and their challenges. From those chats, he created this list of “C-Suite Concerns,” that he recently shared in a piece he wrote and published by the Insurance Journal:
- It is common for a First Notice of Loss (FNOL) to be a notice of litigation, denying an insurance company an opportunity to resolve the claim without third party interference;
- Expansion of the contemplated purpose of the one-way attorney fee statute;
- An aggressive plaintiff’s bar that is confident of a high level of judicial support;
- Significant increases in the cost of reinsurance purchased in the private sector;
- Incremental reinsurance cost associated with the Florida Hurricane Catastrophe Fund’s cash build-up program, where the Cat Fund continues to collect a hefty “upcharge” despite it being in the strongest financial position in its history. Suspension or rescission of the cash build-up program would mean immediate savings for insurers; and
- Consumer and producer dissatisfaction with the premium levels necessary to secure adequate rates reflecting the current status of Florida’s property insurance marketplace.
Joe went on to write: “To varying degrees, the provisions of proposed Senate Bill 76 could bring relief to these concerns. However, absent meaningful legislative reforms such as those in SB 76 that are upheld by the judiciary, the primary response available to insurers is frequent rate increases. Re-underwriting books of business and identifying and canceling individual risks that exacerbate the cost of reinsurance are other tools that have been put in place. These activities tend to end up repopulating Citizens.”
As for the FSR ratings, in this post from Friday, Joe lists those carriers who have affirmed their continued FSR for 2021, the one that hasn’t, and says that Demotech expects to have the rest evaluated by March 19. The post also has an excellent U.S. catastrophe recap from 2017-2021 so far.
LMA Newsletter of 3-8-21