More bad news for Florida’s struggling insurance market: Reinsurance rates are going up

As Florida lawmakers attempt to stabilize the troubled property-insurance system subsequent month, they might face worsening issues with reinsurance, a vital a part of the system.

Fitch Ratings launched an evaluation Wednesday that stated total reinsurance costs are anticipated to extend by greater than 10 % in 2023, pointing to losses from disasters equivalent to Hurricane Ian and “increasing frequency and severity of natural catastrophe claims.”

“Price rises will be most pronounced in the regions worst affected by natural catastrophe events in 2022, including Australia, Florida and France,” the rankings company stated. “Hurricane Ian is likely to have caused between ($35 billion and $55 billion) of insured claims, making it one of the costliest natural catastrophe events ever.”

In the evaluation posted on-line, Fitch additionally stated it expects tighter restrictions when reinsurance insurance policies are renewed in 2023, whereas elevating the chance that Florida property insurers won’t be able to purchase all the reinsurance they want.

“Nevertheless, we believe demand for property catastrophe reinsurance during the 2023 renewals season will be broadly met, except for Florida,” the evaluation stated.

Reinsurance, which is bought in a world market, is actually backup protection for insurers. It performs an important function in Florida, as evidenced by the projected tens of billions of {dollars} in harm from the Category 4 Hurricane Ian, which made landfall Sept. 28 in Southwest Florida earlier than crossing the state.

When property insurers’ losses attain sure thresholds, reinsurance protection is triggered to assist pay claims. Costs of reinsurance are baked into policyholders’ rates.

Florida property insurers depend on a mixture of reinsurance purchased within the non-public market and from the state-run Florida Hurricane Catastrophe Fund. As an instance of the significance of reinsurance, the Florida Hurricane Catastrophe Fund estimated final month it could have $10 billion in losses from Ian.

Reinsurance prices and availability have been an issue within the Florida market earlier than Ian. During a May particular legislative session, lawmakers agreed to spend $2 billion in tax {dollars} to quickly present further reinsurance protection to insurers.

Gov. Ron DeSantis known as the May particular session amid widespread issues within the insurance business which have included owners shedding insurance policies and seeing large charge hikes. Meanwhile, some property insurers have gone bancrupt, and insurance policies have flooded into the state-backed Citizens Property Insurance Corp., which was created as an insurer of final resort.

Problems, nonetheless, have persevered, and lawmakers will maintain one other particular session the week of Dec. 12 that’s anticipated to incorporate making further modifications to attempt to bolster insurers.

House Speaker Paul Renner, R-Palm Coast, stated Tuesday that lawmakers will have a look at a “kitchen sink of options” in the course of the particular session to attempt to stabilize the market and increase non-public protection. He indicated these choices might contain spending further cash to assist with reinsurance.

“It would be temporary, and it has to be contingent on getting major reforms so we actually fix the situation,” Renner informed reporters. “I do not want to be in a situation where we make any kind of new long-term taxpayer commitment to underwrite insurance. That is not the goal. The goal is to have a healthy private market, to then begin depopulating (removing policies from) Citizens so that we get back to where we were not so many years ago, which is a healthy, vibrant market where people can not have a cardiac arrest when they get their renewal bills.”

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