Profits and underwriting making gains
Florida-based property insurance companies as a whole were off to a very profitable start this year, with first quarter 2024 net income rivaling all of 2023’s figures, and net underwriting results now in positive territory, too. That’s the finding of the Florida Office of Insurance Regulation’s (OIR) latest Property Insurance Stability Report, released last week.
“After years of consecutive underwriting losses, insurers saw overall stability with many companies reporting a net profit in 2023. As of Q1 2024, Florida domestic insurers reported positive net underwriting and positive net income,” according to the legislatively-mandated twice a year report, which noted eight new companies have been approved to write homeonwers insurance since the 2022 legislative reforms under SB-2A that eliminated Assignment of Benefits (AOB) contracts and one-way attorney fees.
Per the report’s chart below, Florida’s 45 or so domestic carriers collectively had first quarter 2024 net income of about $266 million and net underwriting gains of almost $160 million. That follows 2023 net income of just over $300 million and underwriting losses of nearly $60 million. The previous seven years had negative net market income, including losses of more than $1 billion each in 2021 and 2022.
Other pertinent findings:
- Adverse loss reserve development (cost of claims greater than reserves allotted) is getting better. 2023 claims were approximately $161 million more than estimated after one year and $399 million at the two-year mark. (In 2022, claims were approximately $224 million more than estimated after one year and $772 million at the two-year mark.)
- Domestic homeowners defense cost and containment expenses rose in 2023, reversing 2022’s first downturn in costs in years.
- The number of lawsuits, as represented by Legal Service of Process LSOP) filings are on the upswing again, ending a previous decline from its high point in June 2021.
- Likewise, Notices of Intent to Litigate (NOITLs), which insurance companies must receive along with a demand at least 10 days before a lawsuit can be filed, are also on the upswing since OIR’s January’s report.
2024 Data Call: Although there were fewer reported closed claims in 2023 (658,512 vs. 732,390 in 2022) the total number of litigated claims as well as non-litigated claims were up. The total cost of indemnity paid for claims closed in 2023 was $15.3 billion (vs. $11.2 billion in 2022) and the total loss adjustment expenses (LAE) paid for claims closed in 2023 was $1.9 billion (vs. $1.5 billion in 2022). This is certainly due in part to Hurricanes Ian & Nicole claims continuing to roll-in in 2023. The average LAE paid across all perils for litigated claims was $10,543 (vs. $9,934 in 2022) and for non-litigated claims was $2,011 (vs. $1,576 in 2022).
There were no 2023 figures reported on the percentage of homeowners insurance claims vs. lawsuits. Interestingly, the peril with the highest percentage of litigated claims was sinkholes (16%) followed by non-hurricane wind & hail (13.42%) and “other water” (13.25%). By comparison, 7.4% of hurricane claims involved litigation. Those percentages, with the exception of sinkholes, went up in 2023.
Reinsurance: The amount of 2023 reinsurance coverage purchased by companies increased an average of 11% from 2022. However, the risk adjusted cost of that reinsurance increased by 27% from 2022 figures. The results from the 2024 Annual Reinsurance Data Call will be finalized next month (August 2024); however, “preliminary data suggests price stabilization with anticipated flat or decreased risk adjusted costs from 2023, on average,” according to the report.
Companies Under Enhanced OIR Monitoring: Only two of the 19 companies referred for enhanced financial monitoring by regulators were actually deemed appropriate for it, bringing the current total to 20 companies under enhanced monitoring.
As usual, OIR has included lots of good charts and further market details, including average premiums charged for homeowners and condominium unit owners and other regional data breakouts. Please let me know if you have any questions or comments.
LMA Newsletter of 7-8-24
