Catastrophe reinsurance providers hold most of the cards for the impending Florida renewals at June 1st, with even legislative efforts to improve the situation “missing the mark” in some cases, a market update from Stonybrook Capital states.
Despite the fact the reinsurance market has in general become more “orderly”, Stonybrook Capital, a specialist strategic advisory and investment banking firm focused exclusively on the insurance and reinsurance industry, believes that a number of market forces will continue to persist and affect the “crucial” Florida and US coastal catastrophe reinsurance renewals at June 1.
“There is an expectation the coastal, especially Florida, domestic carriers will have a challenging June reinsurance renewal even with the implementation of the legislative reforms,” Stonybrook Capital explained.
There is an expectation that tougher terms will persist, while higher pricing will affect all reinsurance renewals in Florida.
At the same time, the lack of retrocession capacity continues to be evident and reinsurers are maintaining their reduction in risk appetite, with higher layers of reinsurance towers preferred and insurers having to retain more risk, as the lower layers remain unappealing.
At the same time the shift to named perils and shying away from frequency and aggregate reinsurance coverages continues as well, all of which has led to a “harsh renewals for primary insurers,” Stonybrook believes.
“With a harder retro market, reinsurers were hesitant to authorize lines not knowing the capacity available to cede their own risks. Although the market has become more orderly in 2023, these market forces continue for the crucial June 1 coastal catastrophe renewals,” the company stated.
Adding that, “Catastrophe reinsurers are in the driver’s seat.”
While reinsurers have looked for a clear end to Florida’s litigation related problems and the reforms implemented by the Senate may provide that, it is still too early for the legislative changes to have a significant impact on the June 1 2023 renewals.
In addition, Stonybrook notes that one reform in particular may have been poorly targeted, as it claims that the Florida Operational Reinsurance Assistance Program (FORA) “missed the mark”, saying that the attachment point for the FORA may not be low enough.
As a result, this “highlights the remaining capacity and pricing issue at the bottom of carriers’ reinsurance programs,” Stonybrook said.