Hurricane Irma to test newer participants in Florida insurance market

New companies have formed in recent years to take property/casualty risk in Florida from state-formed Citizens in a soft market and Hurricane Irma will be the first test for them, said ratings agency AM Best in a Sept. 14 report.

Irma ranked as one of the most powerful Atlantic storms on record before striking the US mainland as a Category 4 hurricane on Sunday, Sept. 10.

Over the last decade, several factors have influenced changes in the Florida insurance market, which has seen a rise in the number of more concentrated local/regional writers.

Following a period of severe weather events in the early 2000s, national carriers started cutting their appetites for Florida’s hurricane-prone business. As national carriers pared down their involvement, other companies formed to fill the demand for displaced insureds, most prominently the state-formed Citizens Property Casualty Insurance Corporation, an entity designed to offer a suitable and affordable replacement insurance option.

Citizens grew rapidly and at its peak covered more than 20 percent of the residential property market. This substantial risk exposure put significant financial pressure on the company and the state, which led to a fairly successful depopulation program designed to reduce overall risk, whereby private insurers were given incentives to assume policies from Citizens. At the same time, benign weather had made Florida business more attractive and, combined with a softer reinsurance market, prompted new companies to form, some for the initial purpose of assuming policies from Citizens.

Several companies such as Heritage Property & Casualty Ins Company, Homeowners Choice Property & Casualty or People’s Trust Insurance Company have written significant amounts of premium for which Irma is the first severe event to test the strength of their business models with regard to risk selection and loss mitigation.

Other comparatively new carriers with a relatively large market share in the Floridian P&C insurance market include American Coastal Insurance Company, ASI Preferred Insurance and Olympus Insurance Company.

Many of these carriers have not been subject to an intense storm such as Irma, and their reinsurance programs have not yet been truly tested. Irma will try the ability of Florida’s newer local/regional writers to mitigate catastrophe risks through appropriate reinsurance channels.

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