Florida property insurers are leaning into US reinsurers: AM Best

Florida property insurers are heavily and increasingly dependent on their US reinsurers, from whom recoverables have doubled in just the past two years, a study by AM Best has shown.

AM Best has its eye on a group of Florida-focused personal property insurers, domiciled in Florida and with a predominant exposure to that home market.

The group drew $1.03 billion in claims from its US-based reinsurers in 2021, a 33.7% increase on the prior year and a doubling from 2019. It’s nearly 10 times the claims sum from as recently as 2016.

US-based reinsurers take about 60% of the reinsurance cessions from the Florida group. About half of the remainder goes to Bermuda.

But premiums assumed from the group by their top ten US reinsurers, including the state scheme, have risen a mere 39% over the same two-year period in which losses doubled, the data showed.

Berkshire has grown most into the market, quadrupling its take of ceded premiums over the past two years. Talanx-Group's HDI Versicherung more than doubled its take. Arch Capital showed above-average growth for the group. Munich Re took it the other way, with assumed premiums down 20% over the two-year period.

And claims managed to outpace premiums assumed to that pace “even without significant hurricane activity,” analyses noted.

The Florida group is heavily and increasingly dependent on its reinsurers. AM Best cited a “significantly higher dependency on reinsurance than the industry average.”

Unaffiliated ceded reinsurance leverage (reinsurance recoverables plus ceded premiums written over policyholder surplus) rose from just over 3x in 2017 to 5.7x in 2021, all well above an industry average of 0.5x.

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