Plus, clarifying ‘average homeowners premium’
Further positive indications that Florida’s property insurance market is stabilizing, stable pricing but questionable availability of reinsurance for the upcoming hurricane season, confusion over the average homeowners premium, Citizens Insurance reports fewer claims lawsuits yet increased litigation costs, and Florida regulators issue another Hurricane Ian data call. It’s all in this week’s Property Insurance News.
Positive Signs: The Florida Office of Insurance Regulation (OIR) has issued an update touting ongoing property insurance market recovery from recent legislative reforms. Ovation Home Insurance Exchange has become the eighth new entity in the past 12 months to be approved to write homeowners policies. OIR also released more data on the market’s recovered profitability, noting that insurance companies reported lower loss reserve development at year-end 2023 than in 2022, “reflecting a much lower degree of uncertainty in the market,” according to OIR. The two-year look-back period saw a nearly 45% decrease in loss reserve development (from $772 million to $398 million) and a one-year look-back decrease of 28% (from $224 million to $161 million).
OIR noted the Florida Hurricane Catastrophe Fund rates are decreasing for participating insurance companies by a statewide average of 7.38%. The rate decreases are in part based on modeled loss cost indications, even while exposure grows. However, the premium paid to the Fund by those companies (which is included in their own policyholders’ premiums) is increasing 1.29%, from $1.513 billion to $1.532 billion. That reflects the rate on line charged by the Fund increasing from 8.9% to 9.01%. The increase will be paid by commercial residential risks (up 10.2%) and condominium unit owners (up 8.48%). Residential properties will see a rate decrease of 0.16%.
© Can Stock Photo / radiantskies
Reinsurance Pricing: The ever-growing cost of reinsurance has certainly been a driver in Florida homeowners insurance rate increases, as I’ve mentioned in recent media interviews. That was shown once again at last week’s OIR public hearing to consider Cypress Property & Casualty Insurance Company’s average rate increase of 18.7% on 13,600 homeowners and condo unit owners’ policies. The company’s representatives said higher reinsurance costs from the summer 2023 reinsurance renewal was the sole reason for the increase. Yet, company Co-CEO Enda McDonnell said legislative reforms have increased the confidence of reinsurers to re-engage with the Florida marketplace. “Early indications for the 2024 renewal show plentiful capacity above the Florida Hurricane Cat Fund level with pricing relatively flat. Below the Cat Fund, capacity in the open market is still very scarce with pricing expected to be relatively flat to up slightly,” said McDonnell. “Consequently, we see the light at the end of the tunnel and do not expect to see a specific catastrophe reinsurance-driven rate increase for our policyholders for the remainder of 2024.” The Cypress team did an excellent job of explaining the need for its rate increase, even addressing a member of the public who had additional questions. Gallagher Re CEO Tom Wakefield told Artemis last week that an increased level of reinsurance capital has led to a more stable market “and it is hard to see anything other than a slight further improvement in pricing from the cedant’s perspective.”
Florida Homeowners Premium Question: A widely varying “average annual Florida homeowners insurance premium” has been reported from time to time and last week it happened again, with a doozy! Online insurance agent Insurify published its own analysis, putting the figure at a whopping $10,996 and projected it to reach $11,759 by year-end 2024. A trusted Florida analyst we know went into OIR’s QUASR database. It shows that the average annual premium paid by the 4,107,990 single family homes in the database was $3,465.90 at year-end 2023. This premium covered homes with an average total insured value (TIV) of $698,146 and was close to the Insurance Information Institute’s 2023 projection of $3,250. The average annual premium for condo unit owners was $1,650, per QUASR.
Citizens Property Insurance: Despite an overall 20% decrease in new litigation from September 2022 to September 2023, Citizens Chief Insurance Officer Jay Adams warns that an additional $100 million to $200 million may be needed later this year to pay outside legal counsel used for claims litigation – in part, due to costly Hurricane Ian lawsuits. Adams told the Claims Committee recently that while legislative reforms have helped lower non-catastrophe litigation, catastrophe claim litigation from Hurricane Ian isn’t covered by the reforms and that the 20% drop is mostly third-party lawsuits.
Ian Data Call: OIR last Thursday issued an industry notice for enhanced catastrophe reporting on Hurricane Ian claims. Data must be submitted by property insurance companies by next Wednesday, April 17 at 12pm ET. The last data call on October 9, 2023 showed 758,644 claims with estimated insured losses of $19.38 billion.
LMA Newsletter of 4-8-24
