Florida property insurers near break-even. Data suggests improvement to continue

Data suggests that Florida domestic market property insurance companies will experience improving performance, as the effects of recent legislative reforms take hold and market conditions improve.

In 2023, the Florida Office of Insurance Regulation (OIR) notes that “Florida domestic property insurance companies reported they produced a combined net underwriting that almost broke even.”

While nearly breaking even is not generally considered something to write home about, in the case of Florida’s property insurance market this same cohort of domestically focused insurers had suffered consecutive years of massive underwriting losses, so break-even is a very positive signal.

The group had lost more than a billion dollars over each of the last three years, as underwriting combined ratios spiked.

While, for 2023, the near break-even underwriting result was augmented by a healthy investment return, meaning “these domestic carriers showed a net positive income in 2023 for the first time since 2016,” Florida’s OIR explained.

There are also signals in the data that their performance may improve further, catastrophe loss activity allowing.

The OIR notes that, “Year end 2023 data reported to OIR reflects a much lower degree of uncertainty in the property insurance market, as insurers reported lower loss reserve development.

“From 2022 to 2023, Florida domestic insurers, including Citizens Property Insurance Corporation, have reported a 44.8 percent decrease from $772 million to $398 million in loss reserve development at the two year look-back period and a 28 percent decrease from $224 million to $161 million at the one year mark.”

While it’s still too early to get overly confident in Florida’s property insurance market, the signals do look incredibly positive and this is likely to be a catalyst for the appetite of risk capital in the state, we believe.

“Florida’s insurance market continues to strengthen, showing signs recent legislation is having positive impacts to the property insurance market,” Florida Insurance Commissioner Michael Yaworsky commented.

“OIR remains steadfast in our efforts to stabilize Florida’s insurance market by implementing legislative reforms and recruiting more insurers to the state. We look forward to continuing this work and promoting a competitive market for policyholders.”

Since the updates to Florida’s property insurance related legislation, now eight property and casualty insurers have been approved to enter Florida’s insurance market.

Ovation Home Insurance Exchange is the most recent approval, which comes from Windward Risk Managers, the management company behind Florida Peninsula and Edison Insurance.

Ovation joins other recent entrants, Safepoint’s Manatee Insurance Exchange, HCI’s Condo Owners Reciprocal Exchange, Orange Insurance Exchange, Orion180 Select Insurance Company, Orion180 Insurance Company, Mainsail Insurance Company, and HCI’s Tailrow Insurance Company, which are all property and casualty insurers that have been approved since the Florida market reforms were enacted.

Perhaps an even more significant sign are some of the names showing interest to begin writing in the state, with entities from the likes of major insurers State Farm and Liberty Mutual also approved to operate in Florida so far this year.

It suggests appetites are if not returning, then being rekindled and companies are readying for doing more property insurance business in the state.

Another strong signal is the appetite to take policies out of Citizens Property Insurance Corporation, the property insurer of last resort for Florida.

The depopulation program has accelerated, with 275,000 policies assumed from Citizens in 2023, reducing its exposure by more than $113 billion.

For 2024, the OIR said that it has already approved 13 companies to assume more than 354,000 policies from Citizens.

There is an additional signal, at least of a reducing burden for carriers operating in Florida, in the form of rates that are decreasing for participation in the Florida Hurricane Catastrophe Fund, with a statewide average decline of 7.38 percent expected.

Add to that a growing appetite for Florida wind risk in the reinsurance and catastrophe bond market, as well as from other insurance-linked securities (ILS) structures and capital providers, and the outlook for Florida’s property insurance market is about as good as it has been for years.

Some are suggesting that market conditions will continue to develop favourably at the mid-year reinsurance renewals, for buyers of property catastrophe protection in locations such as Florida.

But the one wildcard is, of course, losses. With hurricane season forecasts calling for a particularly active year ahead and one citing a 44% chance of a major land falling hurricane in Florida, that could drive a very different outcome and a return to greater pressure, especially on the cost of reinsurance.

However, with the data signalling that the legislative reforms are taking effect positively in Florida’s property insurance market, there is every chance that even after the next major storm, which is inevitable, Florida’s insurance market should come out the other side in much better shape than it emerged from other recent damaging hurricane seasons.

Read all of our news and analysis on the Florida insurance and reinsurance market.