Losses from Hurricanes Irma, Michael causing insurance rate hikes

Hurricanes Irma and Michael continue to make waves in the insurance industry as losses led to significant insurance rate hikes.

Reinsurance renewal rates rose for carriers, who were pushed to make adjustment after years without a hurricane making landfall until Irma in 2017 and Michael in 2018, the Center Square reported. The companies offering the investor-backed insurance for carriers have demanded rate hikes ever since those storms.

A forecast of 15% to 20% for average increases for reinsurance costs by credit rating agency AM Best Co. fell far short of reality.

Three carriers got approval for rate hikes between 20% and 40% from the Florida Office of Insurance Regulation (OIR). Insurers wanting to raise rates by more than 15% must come before the OIR, which brought Velocity Risk Underwriters, Edison Insurance Co. and Capitol Preferred Insurance Co. to the state agency, the Center Square reported.

Many carriers raised rates in double digits but short of 15%, so they don’t need state approval.

Velocity Risk Underwriters got the OK to raise rates by 28.1% for multi-risk policies covering 35,600 Florida policyholders. Other carriers want to put restrictions on policies.

“We have not experienced market conditions like we are seeing this year since 2006,” Brian O’Neill, partner-client executive at TigerRisk, told Reinsurance News. “You have a perfect storm hitting the June 1st renewals.”

The CEO of the state-backed insurer of last resort was not surprised by the rate hikes. Barry Gilway of Citizens Insurance Corp. told participants in an Insurance Journal webinar that insurers lost $340 million in 2019 after earning $797 million in profits in 2014.

“The bottom line is this [market] has turned from incredible profitability, which by the way coincides virtually 100% with the increase in litigation in 2013 to 2019 from 27,000 ligation cases up to 89,000 litigated cases,” Gilway told Insurance Journal.