Improved Florida insurance environment a “favourable market opportunity”

Rating agency KBRA has noted that the Florida property insurance market is now presenting a “favourable market opportunity” to those with the capital, capacity and legacy-free balance-sheets that can take advantage of it.

Florida’s property insurance market has been through a roller-coaster over the last seven years, since major hurricanes impacted the state in 2017 and a situation developed where litigation and fraud drove massive loss creep and much higher than expected losses for the reinsurance and insurance-linked securities (ILS) market.

In the wake of that and other challenging years, while Florida property insurer loss estimates from the major storms kept rising and they kept eating into their reinsurance arrangements from the time, with many exhausting them, the legislature in the state debated reforms and ended up passing laws that are now creating a far more positive environment for those underwriting insurance and reinsurance in the state.

With the new insurance legislative framework implemented, Florida’s property insurance market is showing signs of improvement, in the results of carriers and in the appetite of the reinsurance and ILS market as well.

While at the same time, we’ve seen a number of start-ups and new entrants and even some of the nationwide players now say they are closely watching Florida’s property insurance market, with a view to perhaps becoming more active there.

Because of the improvement seen, KBRA has said that for those able to set-up and deploy capacity there, Florida presents a “favourable market opportunity” at this time.

KBRA noted that, in the past, Florida was a state where the property insurance market faced “historically significant legal challenges”, but noted that the recent legislative changes “appear to have fostered an improved operating environment.”

In recent months, a handful of new entrants have entered the Florida homeowners and commercial property insurance space.

With the sector “characterized by improved market conditions,” KBRA said that there is a “favourable market opportunity”, not least as market capacity has shrunk there until recently, so new entrants can grow more quickly in the state, than they could have before.

KBRA explained, “While the Florida homeowners’ market has historically been challenging, meaningful legislative reforms have yielded significant opportunities for a start-up entering a market with (until recently) declining private insurer capacity.”

For the newest entrants and those with clean balance-sheets and no legacy exposure in the state, Florida now presents a region where property insurers “can be selective with respect to risk selection and agency appointments.”

The opportunity is likely to persist for a time as well, as new entrants are few in number and legacy companies continue to exit Florida’s property insurance market.

KBRA believes the opportunity is “significant” for those able to mobilise capital and underwriting capabilities in Florida, while being one of just a few startups there can give a competitive advantage.

It’s a further sign of the improving sentiment on Florida’s property insurance market. It is going to be interesting to see how things evolve there once the current hurricane season has passed, losses or none.

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