Perfect storm to hit insurance carriers with reinsurance renewals

According to a reinsurance professional, the 2020 reinsurance renewals will be a perfect storm hitting insurance carriers on June 1.

Florida hasn’t seen anything like today’s market conditions since 2006, Brian O’Neill, partner-client executive at TigerRisk, told Demotech.

“We are a supply and demand economy and given the shortage of retro cover available (especially low attaching cover), the loss creep from Irma and to some degree Michael, the lack of legislative reforms to fix the one way attorney fee statutes in the state and then throw in a Global Pandemic – you have a perfect storm hitting the June 1st renewals,” O’Neill told Demotech.

Even before the global pandemic, Demotech knew Florida insurers wouldn’t be doing normal business. Increased costs for catastrophe reinsurance, jurisdictional risk and Citizens Property Insurance Corp.’s competitive position in the market saw to that.

“Having been involved in Florida’s residential property insurance marketplace since 1996, our view is that the financial and market-based criteria affecting residential property insurance have never been more difficult to navigate,” Demotech said.

Eight hurricanes and 11 tropical storms from 2016 to 2019, plus costs of dealing with the COVID-19 pandemic, had to see response from insurers and their reinsurers, according to Demotech.

Carriers had to change their operating plans and business models with no help from legislative reforms in the 2019 session. Those companies included Capitol Preferred Insurance, People’s Trust Insurance and Avatar Property and Casualty Insurance. Demotech reported that other carriers will act similarly.

Demotech reviewed preliminary reinsurance program proposals for the approaching storm season, which runs from June 1 through May 31, 2020. Joseph Petrelli, president and co-founder of the firm, said they’ll begin evaluation of how the cost of reinsurance will affect carriers’ operations and the vertical and horizontal limits they purchase, according to Demotech.

After conference calls with each carrier to review financial projections and results, Demotech plans to issue affirmations.