Florida insurance market improving, challenges remain for reinsurers: TransRe’s Rhodes

Florida’s tumultuous insurance market is showing signs of improvement, raising hopes for some relief in upcoming June renewals, Kyle Rhodes, President, North American operations at TransRe stated during AM Best’s recent Reinsurance Briefing.

Experts are cautiously optimistic, pointing to a number of factors, including reinsurance rate adjustments and legislative reforms, as potential drivers of positive change.

The state’s reinsurance challenges have stemmed from a complex interplay of supply and demand. For years, demand surpassed supply, leading to increasing premiums and limited coverage options, however, recent trends suggest a potential shift, Rhodes noted.

“Florida is driven by supply and demand,” explains Rhodes. “It was a problem for quite some time. And I think in recent years with meaningful reinsurance rate increases, and in part due to the legislation reform, the supply side has outpaced the demand.”

Increased issuances of catastrophe bonds have further bolstered the market, adding to the available capital, he added.

This influx of capital has led to “great relief in the middle, the top of those programs in ’24,” according to Rhodes. Reinsurers, seeking to mitigate their risk have gravitated towards these higher layers of coverage.

However, the lower layers of reinsurance towers, those covering smaller, more frequent claims, remain a challenge. “When you look at the reinsurance towers, I mean at the bottom of the programs, there’s still supply, but you’ve got to pay for it, right?” the executive stated.

The rates for this coverage remain high, and experts predict they may even rise following the two hurricane landfalls in 2024.

While the storms were not as devastating as initially feared, they still impacted insurers and third-party capital providers, prompting reassessments of risk.

Looking ahead to 2025, Florida is projected to see further growth in its insurance market, Rhodes highlighted.

New companies are entering the state, and Citizens Property Insurance Corporation, the state-backed insurer of last resort, is actively reducing its policy count, potentially falling below one million.

“We expect there’ll be a considerable amount of new open market limit in ’25 into Florida,” the executive noted. The key question is the behaviour of these new market entrants, Rhodes concluded.

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