Gallagher Re execs: Florida-specific accounts down 10.7% on average amid “ample” capacity

By David Bull

June 3 - (The Insurer) - Florida-specific accounts renewed with risk-adjusted pricing down 10.7% on average, according to preliminary data from Gallagher Re, with Hurricane Milton-affected layers below the state’s cat fund experiencing more supply than expected.

Speaking to The Insurer just after the renewal completed and before the release of its mid-year update next month, the reinsurance intermediary’s executive vice president Adam Schwebach described a much more “streamlined” renewal this year.

“I think the market cleared itself very well, given that there was growing demand from reinsurance buyers; that was a theme we heard early from reinsurers about excess demand coming to the market.

“But from the reinsurer side there was ample capacity there to meet that demand. So at the end of the day I think everybody ended up in a position they could be comfortable with,” he said.

His colleague Joshua Knapp, also an executive vice president, reported that there was readily available capacity below the cat fund with risk-adjusted pricing on those lower layers down 8% to 9%, despite in many cases being hit by Hurricane Milton losses.

“Despite that there were definitely markets that were willing to either step back into the market who had previously been culling their books, or they were a bit more cautious (previously) because the legislative reform hadn’t had a chance to flow through the system and be tested,” Knapp observed.

He added that middle layers on cat excess-of-loss programs were down 10% to 13%, and then upper layers, which were also the subject of heightened competition last year from traditional reinsurers and ILS, priced down 13% to 20% or more on a risk-adjusted basis.

As previously reported, there was an expectation of meaningful incremental demand for cat limit in Florida at the 1 June renewal, in part from the wave of start-up homeowners carriers that have entered over the last couple of years, as well as the industry attachment point of the Florida Hurricane Catastrophe Fund increasing.

Knapp noted that increased demand for low-down limit from individual carriers has not been proportional with the headline higher attachment point for the fund. Additional segmentation has been added to the fund’s rating algorithm to account of the age of the roof of a property.

This means that actual demand at the individual carrier level depends on the nature of their portfolio.

REINSURERS COME IN FROM THE SIDELINES

The executive suggested that renewal dynamics in those lower layers has been driven a lack of reinsurers retrenching, supplemented by a number of players that had been on the sidelines coming back in.

“They are coming back because they’ve gotten more comfortable with the legislative environment in Florida, driven by the fact they had a very high-quality data point in Hurricane Milton to provide and actually see it in the numbers,” he said.

Schwebach also pointed to the growing confidence in the market that reforms are working in ways that are demonstrable with data.

“Everybody is seeing these reforms that were passed are absolutely working. That was a common comment we heard from reinsurers throughout this process,” he commented.

He credited industry events, including Gallagher Re’s Florida summit in January, with bringing reinsurers and buyers together, along with contractors and roofers to discuss the effectiveness of the legislative changes to curb litigation-driven claims inflation.

Meanwhile, attritional loss performance in relation to perils such as convective storms has also improved.

“All of these things are demonstrating to reinsurers that now is a very, very good time to either maintain lines or grow lines within the state of Florida, across the board, and I think we saw that from every reinsurer we dealt with this year,” said Schwebach.

Knapp noted that reinsurers that participated through the entirety of reinsurance programs hit by Milton last year still made money, with the upper layers loss free.

The executives also commented on terms and conditions, with some evidence of buyers looking to buy down retentions, while requests from reinsurers around deposit premiums largely disappeared.