A Florida Property Insurance Perspective

Have you heard of Hurricane Amnesia? That is the name that was given to the soft market insurance premium cycle that affected Florida and the coastal U.S. for the eleven years following Hurricane Wilma. An abundance of global capital seeking return on investment in the insurance sector led to a surplus and an increase in carriers interested in writing business increased competition driving premiums down and allowing agents and risk managers to negotiate more favorable terms and conditions.

That was bound to change as the U.S. property and casualty industry experienced underwriting losses in early 2017 with a drop in net income of twenty percent followed by a series of tropical storms in the latter part of 2017. The most significant losses were from tropical storms Harvey, Irma and Maria which had an estimated impact of $ 80 billion.

It is anticipated that premiums for the peril of windstorm will increase in the range of 15 to 25% in 2018 as those factors adjust. So far those rate increase predictions have not come to complete fruition, except for coastal properties that suffered Hurricane damage or properties that do not model well. (All coastal properties are wind modeled) However, many believe the current marketplace is unsustainable because of the continued pressure of low interest rates eroding returns.

In Florida and the coastal U.S. property owners have been faced with higher retentions for the peril of windstorm. From the insured’s standpoint the preference is for the higher deductibles to be applied to Named Storms, or specifically Hurricanes, and not for all windstorm events where carriers have the appropriate spread of risk and the law of large numbers to pay claims. The standard leading into the last several years had been 5 % of total insured values at any one location. That changed a few years ago with an increase in competition and an influx of global capital with the associated reduction in reinsurance costs. The norm became 3 % for named storms with additional deductible buy down programs readily available. Outside of Florida coastal properties are faced with lower deductible of 1% or 2%.