Insured losses associated with Hurricane Idalia in Florida are expected to be lower than those caused by Hurricane Ian last year, according to assessments from AM Best.
The credit agency attributed this to the path of Hurricane Idalia, which traversed the less densely populated Big Bend region, characterized by lower insured property values compared to other coastal areas.
While Hurricane Idalia is anticipated to be manageable for insurers in terms of earnings impact, it comes on the heels of above-average catastrophe losses in the first half of 2023, primarily attributed to severe convective storms and secondary perils. Consequently, property insurers are likely to face pressure on their underwriting results for the entirety of 2023.
Florida's property insurance market is already grappling with multiple challenges, including increasing concentration. The top 15 property insurers accounted for 60% of direct premiums written in the past year, marking a 2% increase over the last two years. Citizens Property Insurance Corp., recognized as a state-backed insurer of last resort for Florida residents, has been a key driver of this concentration, quadrupling its premiums in just three years to reach $3.2 billion in 2022.
The report also highlights a decrease in premiums ceded to non-U.S. captives by a composite of Florida-concentrated personal property insurers in 2022. However, this reduction was primarily driven by a single company, as some insurers increased their reliance on this strategy. The use of captives can be attributed to insurers seeking to bridge gaps in their reinsurance protection in the traditional reinsurance market.
Nevertheless, ceded leverage remains high, with an element of credit risk. The composite of Florida-concentrated insurers now accounts for 37% of the state's property insurance premium and is poised to gain more market share.
Additionally, there has been an increase in the average pricing of flood policies offered through the National Flood Insurance Program, contributing to notable growth in the private flood insurance market in Florida. The number of policies surged by 30% in 2022 compared to the previous year, with five companies accounting for 95% of this growth.
“Because of the significant losses in Florida in recent years, some reinsurers have been re-evaluating their aggregate exposures and capital allocation targets there,” AM Best director Jason Hopper said. “The losses paid by U.S. reinsurers as a share of premiums assumed from Florida personal property specialists continued to rise in 2022.”
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