Florida property rates still well behind loss trend & reinsurance cost: KBRA

Florida insurers continue to take rate gains well short of what loss trend and problems with reinsurance capacity might demand,  KBRA have said in a report.

“Despite rate increases, premiums continue to lag losses thereby causing material earnings declines, while ongoing elevated litigation, inflation, and other effects will continue to drive up claims costs,” analysts wrote.

Years of elevated nat cat activity is starting to look like a “new normal,” bearing bad news for homeowners about forward pricing needs.

“If storm activity continues along its more recent pattern, KBRA would expect the industry’s gross nominal losses will continue to rise, especially in the context of higher inflation, potential demand surge, and rising insured values.”

Primary carriers in Florida homeowners’ market are pinched on both sides as rising reinsurance costs have “generated substantial ongoing pressure” as reinsurance capacity dwindles.

Major players including even Axis Capital, Everest Re, Markel, and SCOR have all announced plans to “significantly reduce” exposures or quit the market altogether.

Others, seeking to reduce earnings volatility, may largely stay the course, but are directing more and more of their appetite to the comparatively stable casualty lines.

The tipping of those scales has been more than enough to draw blood on the Florida primary market, pushing a number of regional players into liquidation.

“Many carriers could not place their desired catastrophe reinsurance program at all or were forced to accept reduced coverage and/or higher pricing that did not fully meet their needs,” KBRA analysts said of the mid-year renewals.

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