50%+ rate requests considered
Two property insurance companies explain at public hearings the reasons they need 50%-plus rate increases on their Florida policies, reinsurance companies express concern to Florida insurance carriers about potential loss creep from Hurricane Ian, plus a third insurance carrier is about to face regulators over its Florida rates. It’s all in this week’s Property Insurance News.
Public Rate Hearings: The Florida Office of Insurance Regulation (OIR) held public hearings last week on rate requests by two property insurance carriers. Amica Mutual Insurance Company is asking for an average rate increase of 54.1% for 479 of its Florida Dwelling Fire policies, effective July 1, 2023 under a file-and-use submission. A company representative noted its rate inadequacy was driven by a rise in frequency for both catastrophe and non-catastrophe claims, an increase in claim severity, and a long period of time without a rate increase. Reinsurance costs as a percentage of premium rose from the single digits in previous years to 18% in this filing. Most of the policies would see annual premium increases of $100-$200, with some as high as $500. A representative testified the company took into account the recent legislative reforms of the Florida property insurance marketplace, which resulted in a decrease in rate indication of 6.4% which grew to 7% to 8% when adding in claim expense ratios.
OIR also heard from Castle Key Indemnity Company, Florida’s seventh-largest writer of homeowners insurance policies, and part of Allstate. The company wants an average rate increase of 53.5% for its Homeowners Multi-Peril for Condo Owners (HO-6) policies, effective May 14, 2023 under a use-and-file submission. This filing currently impacts 67,705 policies, following Castle Crown’s decision to stop writing new condo policies in fall 2022. It’s one of four rate filings it has made in the past two years resulting in an average 130% increase.
A company representative told OIR its accumulated rate inadequacy was due to a rapid increase in policies beginning in 2020 and a lack of subsequent data to run an indication because the book of business was still relatively new. The minimum rate increase would be about 1% and the maximum almost 94%, with the vast majority of policyholders seeing increases of between 50% to 70%. The company noted its reinsurance costs doubled in 2022, with reinsurance now 43% of written premium, up from 30% from just 11 months ago when this filing was made. The representative said that recent legislative reforms, specifically the removal of Assignment of Benefits (AOB) and one-way attorney fee reform, allowed the company to reduce its loss experience by 4.9% in this filing in anticipation of the future benefits the reforms will bring.
OIR is expected to make a decision on both rate requests within the next two months.
© Can Stock Photo / radiantskies
Questions from Reinsurers: We sat down with a handful of insurance and reinsurance professionals last week to get a feel for what is on reinsurers’ minds. We discussed the Castle Key hearing commentary that cited a rise in reinsurance rates as a key reason for their rate increase request and litigation reforms that provided calculated savings. First, the reinsurers are concerned about loss creep, as we saw in Hurricane Irma: Will Hurricane Ian losses from the reporting period after the fall 2022 storm increase as the months go on? The uncertainty of loss creep weighs heavy on reinsurers who, like everyone else, want to plan for the future (seems like an oxymoronic exercise sometimes in the insurance business!).
Next, they are wondering what crafty ideas and schemes will arise in the coming months from those seeking to bilk the system, in the aftermath of legislative reforms passed to attempt to stop the “hustle” experienced by insurance consumers when they are duped into suing insurance companies, or worse, get locked into contracts by bad actors at their front door. Third, the reinsurers want to know how on earth this legislature will reduce the size of Citizens Property Insurance, who, as the largest property insurer in Florida, is the largest “competitor” to the private market. As to the future of rates at the June 1 renewal: We did hear that reinsurance rates most likely will be flat, with capacity above the Florida Hurricane Catastrophe Fund layers, but below these layers? As they say on TV, stay tuned, news at 11!
Another Hearing Upcoming: Details are few at this writing, but another property insurance carrier, American Traditions Insurance Company, will have a public rate hearing before OIR on March 7, 2024 at 10am. The company has three open filings before OIR, involving rates for its Homeowners Multi-Peril, Dwelling Fire, and Mobile Home coverages. We will cover this as we have extensively covered recent hearings and are happy to discuss with you afterward.
LMA Newsletter of 2-26-24
