Premium rates for natural catastrophe risks in Florida continue to be inadequate, which is why Swiss Re is giving that market a wide berth — for the time being, at least.
“Historically we believe the Florida market has been underpriced and the rates that are required for the actual risks of loss in the state are not appropriate — and that’s why we’ve been systematically underweight for this risk,” according to Swiss Re’s Chief Financial Officer John Dacey, during a media briefing to discuss the group’s first quarter results.
Dacey’s comments cannot be welcome news for Florida property insurers, which are bracing for sharp increases in reinsurance renewal premiums in the next few weeks.
While Swiss Re has some exposures in the state, Dacey said the kinds of losses the Florida market has seen “from fairly moderate hurricane seasons have laid bare the fact that these prices have not been adequate.”
In addition, there are also the issues around inflated claims (related to assignment of benefits) and potential fraud, “which the Florida legislature apparently is finally looking to address.” (An AOB is an agreement that transfers the insurance claims benefits of a policy to a third party, which can inflate claims.)
“But I think Swiss Re will continue to require adequate pricing for any risk that we write there,” he said. “And if the market is prepared to accept our view of what the real risks are and the expected loss-costs, then we will write business in that market.”
However, Dacey wasn’t optimistic that there will be “important price adjustments” in the Florida market. “If there are, we’ll come in, but we will only do so at what we’ve judged to be adequate rates.”
Photograph: Cars and a motorcycle are submerged in floodwaters on Wednesday, Sept. 16, 2020, in Pensacola, Fla., when Hurricane Sally made landfall near Gulf Shores, Ala. as a Category 2 storm. The storm pushed a surge of ocean water onto the coast and dumped torrential rain that caused flooding from the Florida Panhandle to Mississippi and well inland in the days ahead. Photo credit: AP Photo/Gerald Herbert.
