A myriad of forces continues to pressure personal property insurers in Florida, and while carriers have responded with rate increases and underwriting adjustments, rate adequacy remains a challenge for some, according to AM Best.
A by-product of the increased frequency of secondary perils, elevated reinsurance costs, rising litigation costs, and the flouting of building codes/laws, Florida personal property insurance firms have been reporting increasingly severe underwriting losses.
In response, AM Best notes that carriers have pushed up rates, made some underwriting adjustments and targeted non-renewals while avoiding the more difficult areas of the state.
However, in spite of these efforts, the ratings agency warns that rate adequacy continues to challenge some players as they request rate increases, compounding rate actions taken in previous periods.
The Florida market challenges have resulted in some casualties, with two failures of Florida-based personal property firms reported in Q1 2022, as defined in AM Best’s composite grouping.
The recent fortunes of carrier FedNat highlights the difficulties of the Florida property market. After being downgraded and announcing expected underwriting losses for Q1 2022, the company cast doubt over its ability to continue as a going concern. And all of this comes after AM Best reported two failures in 2021.
“Compounding the situation is the ongoing dampening of risk appetite for the companies that remain,” says AM Best. “In what appears to be a replication of actions taken a decade ago, national carriers have also started to retrench, with AIG and Progressive redefining their guidelines for Florida.”
Unless some significant changes are made, the ratings agency feels that companies will continue to face numerous challenges.
“Florida property insurers may find full placement of their catastrophe reinsurance programs ahead of the upcoming renewal season a challenge,” said Chris Draghi, associate director, AM Best.
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