Florida’s reinsurance market, after three years of significant rate hikes, saw a pause in 2024. Despite the slight softening, reinsurers viewed the outcome positively, according to Gallagher Re report.

At the 6.1 renewal, most risk-adjusted rates either remained flat or decreased by up to 10%. This confirmed 2023 as ‘Peak Florida’.

The reinsurance market softened early in the renewal process but stabilized as capacity dwindled closer to June 1

Insurers completing their programs in early May benefited from ample supply and increased capacity from reinsurers. However, this changed near June 1, influenced by forecasts predicting a severe North Atlantic hurricane season.

Florida’s insurance market experienced difficulties

Florida’s insurance market experienced difficulties

Florida’s insurance market has experienced difficulties in recent years, with some private insurers becoming insolvent, and others choosing to halt coverage there altogether because Florida insurers will have a challenging June reinsurance renewal, even with the implementation of the legislative reforms.

FHCF’s portion of losses related to Hurricane Ian is expected to range between $6 bn and $13 bn, with a projected ultimate loss amount of $10 bn (see Natural Catastrophes Drivers).

The introduction of the Reinsurance to Assist Policyholders Program (RAP) and the Florida Operational Reinsurance Assistance Program (FORA) will help soften the reinsurance market to some extent.

On May 23, the US National Oceanic and Atmospheric Administration forecasted “above normal” hurricane activity for June to November, with up to 13 hurricanes and 25 named storms. Colorado State University estimated a 42% chance of landfall on the Gulf Coast, higher than the long-term average of 27%.

Retro reinsurance capacity and catastrophe bond

Retro reinsurance capacity outlook

The outlook affected capacity providers. Retro capacity became scarce, and available capacity was used more opportunistically at higher prices.

May saw a record $3.92 billion in catastrophe bond issuance. However, Florida benefited less as much of the issuance targeted hurricane risks outside the state.

More typical issuance patterns could have positively impacted Florida renewals.

Overall, 2024 is expected to be another record year for cat bond issuance, with $11.25 billion issued by May 31, compared to $7.97 billion in 2023.

Predictions for an active hurricane season

Predictions for an active hurricane season

Risk spreads have widened since February 2024, mainly due to a strong pipeline. Predictions for an active hurricane season and some cat model changes also contributed, but less significantly. US wind-exposed risk spreads remain 15% below January 2023 levels.

Over 80% of cat bonds issued so far in 2024 have hurricane exposure, a higher percentage than usual. Several new Florida-focused cat bond sponsors emerged. Few large programs now lack cat bond capacity.

Traditional reinsurers showed increased capacity during this renewal. Many markets offered competitive quotes and increased line sizes to defend their positions. Reinsurers judged insurers based on prior-year loss development within their property programs. Cedants with strong underwriting records thrived.

Reinsurance market continues to stabilize

Reinsurance market continues to stabilize

As the reinsurance market continues to stabilize, OIR is seeing continued interest from authorized insurers in the Citizens Depopulation program. In 2024, OIR approved 13 companies to assume more than 354,000 policies from Citizens.

In 2023, more than 275,000 policies were assumed from Citizens, reducing Citizen’s exposure by more than $113 bn.

Gallagher Re noted less migration to higher layers and more support for lower program layers. There was limited pressure to increase retentions.

Reinsurance rate decreases

The largest reinsurance rate decreases were seen in layers above the Florida Hurricane Catastrophe Fund, possibly incentivizing additional support for lower layers.

A new Florida insurance law and proposals have the potential to reduce the cost of homeowners insurance in the state, according to Beinsure Research.

“Reforms put in place in the closing weeks of 2022 and proposed in the first quarter of 2023 suggest Florida is now quite serious about fixing the fraud and legal system abuse that have contributed to the state’s insurance crisis,” stated Addressing Florida’s Property/Casualty Insurance Crisis, a Triple-I Issues Brief which built on one Triple-I released about Florida’s homeowners insurance market in August 2022.


AUTHORS: Adam Schwebach – Executive Vice President Gallagher Re, Broking (Florida), Bryan Friendshuh – Executive Vice President Gallagher Re, Broking (Florida)

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