RenaissanceRe sees strong Florida renewals, but still can’t be tempted
RenaissanceRe won't likely be tempted to take a deeper dive into Florida property cat despite an outlook for double digit demand gains and strong pricing, top officials have said.
“Although we believe the market is in a much better place, we remain cautious,” CEO Kevin O’Donnell told his company's first quarter earnings call.
He cited “almost a decade” of reduced exposure to the smaller local players that dominate the Florida homeowners market and haven't yet crossed the RenaissanceRe bar.
The broader US property cat market up for renewal mid-year can hold recent levels. “We think things will trade similar to what they've traded since 2023,” chief underwriting officer David Marra added.
RenaissanceRe's more recent strategy has been to take its cat wind exposure in the US southeast by working predominantly with major nationwide players, not so very present in Florida.
It remains "unlikely" for RenaissanceRe to shift that stance today, regardless of any changes that pop up in rate, terms or conditions, he said.
ILS unit Vermeer, managing capital for the Dutch pension system, "certainly has appetite to put that sort of capacity out," O'Donnell nonetheless noted of the fund devoted to remote layers of US property cat.
RenaissanceRe's own caution on Florida comes despite a generally strong appetite for property cat in the group.
“We are still getting excess return compared to the other [non-cat] property portfolio by writing property cat, so we are focused there,” O'Donnell said.
But Florida could be looking strong at the mid-year reinsurance renewals, O'Donnell and other top officials admit. Demand is up and discipline looks set to defend pricing.
“We expect good growth and demand and good discipline from the market,” Marra said in comments that appeared to veer beyond Florida to the broader 6.1 renewals.
High single digit demand growth visible at the 1.1 renewals could shift up a gear. “We would expect more,” Marra said, “maybe 10-15%.”
“We are optimistic about the ability to get a good profit with an appropriate level of risk,” Marra said.
Demand growth is visible chiefly at the tops of towers, a good match to reinsurer appetite, he indicated.
Demand growth specifically in Florida seems specially likely when one looks at the primary market recovery. Policy take-outs from the state's residual market insurer point to private sector reinsurance demand. The lapse of a state-mandated reinsurance layer also helps the private reinsurance market outlook, O'Donnell said.
But “caution” will not mean any retreat from existing partners on the Atlantic hurricane cat market, O'Donnell insisted during a lengthy consideration of the 2024 season outlook during his opening comments.
“The possibility of an elevated hurricane season is not a risk we transfer to our clients,” he said. RenaissanceRe builds resilience otherwise.
Some of the improvement to the Florida primary homeowners insurance market can be traced to legislative reforms.
O'Donnell sees “confidence that recent regulatory reforms have helped stabilise the market.”
Florida authorities moved in 2022 and 2023 to help the state's insurance market, chiefly working tort reforms. Key legislation enacted in December 2022 eliminated assignment of benefits clauses (AOB) for lawsuits as well as the one-way attorney fee provisions that protected plaintiffs from legal fees.
Critics of Florida's more liberal prior regime had argued that contractors armed with AOB agreements and backed by an army of lawyers had too much leverage. That left Florida with an overwhelming 76% majority of the nation’s lawsuits on a small 7% minority of the nation’s claims.
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