Another carrier stops writing new business
Another Florida property insurance company has joined more than a dozen others in the last year who placed moratoriums on writing new business or left the state altogether. People’s Trust Insurance told insurance agencies last week that it would no longer write new policies. The reason: a lack of available and affordable reinsurance.
“Due to the current reinsurance market, we are no longer accepting new business applications as of end-of-business today, Thursday, April 27th, 2023. We anticipate reopening once we have updated rates that reflect these increases in reinsurance costs that all carriers are experiencing,” the carrier wrote in an agency bulletin, according to a prominent insurance agent who received the notice. “We want to assure you that we are on track to maintain our financial strength, we anticipate having more reinsurance than is required, and we will continue to renew your existing book of business.”
Updated rates for the Florida market this year are projected to increase an average of 76% as we reported in our April 17 newsletter. Those higher rates – pushed now by reinsurance rate increases of 50% to 100% (following last year’s 30% increase) – are now affecting the real estate market, especially condominiums as we previously reported. The news media is catching on to the pending reinsurance calamity, including this story from Friday by WBBH-TV NBC 2 in Ft. Myers: Florida insurance companies dealing with their own rate hikes as more collapses loom.
Governor Ron DeSantis
Meanwhile, Governor DeSantis was in London last week meeting with reinsurance companies in the United Kingdom. Accompanied by Citizens Property Insurance President Tim Cerio, his office issued a release, saying the Governor “secured a commitment from companies in attendance to increase access for carriers serving Florida policyholders.”
“Access to affordable reinsurance options for Florida carriers is important for the stabilization and long-term growth of our property insurance market,” said the Governor. “Florida is home to one of the largest and most complex insurance markets in the world, and I was happy to provide an update about recent legislative reforms that have made the market more attractive to businesses.”
My view is that this sort of personal contact with market participants is extremely helpful. But at this point, what we really need is the reinsurance bridge that is at the heart of the proposed temporary state program, the Florida Insurance Rate Reduction Mechanism. By providing a way to purchase reasonably priced reinsurance, the state could help avert further insurance company insolvencies and potentially save Florida homeowners up to $2 billion annually, or approximately 15% for the average policyholder.
Insurance companies are struggling to purchase adequate reinsurance by June 1, the start of hurricane season, just 30 days away. That’s what happened to UPC Insurance in February, forcing it to become the seventh Florida domestic insurance company to become insolvent in the past 15 months. Time is of the essence. Otherwise, we fear more companies will be forced to join People’s Trust in suspending new business or pulling out of the state altogether or worse, risking insolvency.
LMA Newsletter of 5-1-23
