December 9, 2023

Florida’s property insurance market is still a long way from becoming a stable environment for insurers to operate in, but there are signs that an inflection point has now been reached, suggesting that Florida’s insurance industry is on the path to more normalization, according to ALIRT Insurance Research.

welcome to florida signA new analysis by David Paul, Head of Insurance Research at ALIRT, covers remaining insurance market trends in states with high catastrophe risk, which naturally includes Florida.

In general, Florida, California, Texas, and Louisiana are considered the least functioning states, but also the most vulnerable to disaster risk and eventual climate change, driving demand for state-backed solutions, so there is a residual market in each state.

Of course, there are issues beyond catastrophe and climate risk that play into these risks, such as Florida’s lawsuit claims crisis, and California regulations that prevent insurers from pricing risk as adequately as they deem necessary.

This increased the flow of policies to the residual market, which has driven significant growth for Florida Citizens Property Insurance in recent years.

But David Paul of ALIRT Insurance Research seemed more optimistic about Florida’s prospects, while emphasizing that there is still a long way to go.

Paul sees the reinsurance market’s ability to meet Florida’s needs as one of the key drivers of the improved outlook.

ALIRT has previously highlighted the important role of cat reinsurance to Florida-focused property and casualty insurers, saying Hurricane Ian in 2022 could be the death knell for many of them without the backing of cat reinsurance arrangements.

Now, after a mid-2023 renewal, ALIRT again sees the reinsurance market’s response to Florida’s woes as key to its recovery.

While ALIRT’s Paul pointed to a “global reinsurance market tightening” as their operating returns have failed to hit barriers in recent years, he seemed satisfied with how the market responded to Florida’s June renewals.

“They say the night before the dawn is the darkest, and recently there has been a glimmer of hope for Florida citizens and the property insurance market across the state,” Paul explained.

It continued, “Fears that reinsurance capacity would evaporate further during the crucial 6/30 renewal period proved unfounded as higher rates (combined with tighter terms and conditions and higher attachment points) attracted new reinsurance capital into the market.”

According to Paul and ALIRT, this is the number one reason for the improved outlook for Florida’s property insurance market.

The second is that “a number of new insurance companies have announced their intention to enter the market”.

Here, ALIRT cites Tower Hill Reciprocal Insurance Exchange, Vyrd Insurance Company, Slide Insurance Company, and Loggerhead Reciprocal Insurance Exchange established in 2021-2022, while HCI Group also launched Tailrow Insurance Company.

Additionally, ALIRT highlighted one of the rumored start-ups, Village Protection Insurance, which is said to be seeking funding to enter the Florida property insurance market in 2024.

Of course, driving this renewed interest is an improving legislative environment, as voters hope that legislation enacted in the last year or so will begin to prove itself, reducing some of the problems that Florida property and casualty insurers have been facing.

That was enough to attract some new capital in reinsurance and insurance-linked securities (ILS), as well as equity capital into new Florida-focused insurance company startups.

We’ve heard more rumors about a large sovereign-wealth backer for a new airline in Florida, but haven’t gotten any firm details yet.

But there are clear signs that interest is returning, although in both reinsurance and ILS it is only with higher attachment points and tighter underwriting terms and conditions.

ALIRT also referred to State Farm’s statement that it intends to maintain a “substantial presence” in the Florida homeowner business in light of what it considers encouraging market reforms.

Finally, ALIRT also mentioned the growing interest in Florida’s civic depopulation process, which, as we recently reported, is starting to accelerate.

The predicted “win-win situation” did play out in June’s reinsurance renewals for Florida participants, but it appears that most are prepared for it, accepting the cost and terms of reinsurance, recognizing the need to work with reinsurers and ILS funds to achieve results that allow forward transactions, while waiting for the effects of legislative reform to become more apparent.

ALIRT Insurance Research’s Paul concluded: “While the Florida property insurance market is still a long way from returning to normalcy, the actions described above demonstrate that it may be at an important inflection point.”

Read all our news and analysis on Florida’s insurance and reinsurance market.

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