Aon's report highlights the positive turnaround of Florida's insurance market, paving the way for growth despite challenges
Florida's insurance market has witnessed a notable recovery during the mid-year renewal of 2023, offering a much-needed boost to the state's insurers, according to a report by Aon. Despite concerns surrounding capacity shortages after Hurricane Ian, catastrophe reinsurance capacity remained accessible, albeit at a higher cost. The market's improved position, compared to 2022, can be attributed to various factors that contributed to stability and attracted new capacity, including the implementation of state tort reform.
Positive factors drive market stabilization
The implementation of state tort reform has played a significant role in bolstering Florida's insurance market. This reform aims to address issues within the legal system, leading to lower overall loss costs and attracting insurance and reinsurance capital back into the market. The improved terms and conditions resulting from the reform are also expected to draw additional reinsurance capacity to the state, setting the stage for future growth opportunities.
Opportunities for growth and support programs
Encouraging signs of growth opportunities are emerging in Florida's insurance market. The continued expansion of Citizens Property Insurance Corporation, the state's windstorm insurer of last resort, creates possibilities for profitable depopulation, stimulating the market further. The mid-year renewal benefited from the certainty provided by state reinsurance support programs, such as the Florida Optional Reinsurance Assistance Program (FORA) and the Reinsurance to Assist Policyholders (RAP) program, which have provided valuable support to insurers.
Challenges persist, particularly related to prior accident year results and the potential impact on insurers following the final settlement with the Florida Hurricane Catastrophe Fund. However, captive reinsurers have played a meaningful role in alleviating pressure on the lowest layers of insurer programs. The profits generated from low layer captive deals in 2022 have rolled into 2023, offering valuable capacity for insurers, thanks to the relatively low frequency of catastrophe losses in Florida.
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