A new report from AM Best highlights how rigid Florida’s personal property insurance market has become in recent years, with significant premium increases and limited capacity. Factors such as frequent and severe weather-related losses, inflation, and rising reinsurance costs have prompted insurers to adjust rates and risk appetite.

The Florida Legislature has focused on litigation issues that hinder insurance operations, attracting new participants and creating more capacity. While some carriers have reduced their participation or exited the country, new companies have entered the market.

AM Best identified 47 specialty insurance companies that primarily insure personal property in Florida. This group excludes companies associated with larger national airlines and Citizens Property Insurance Corporation, but includes insurers that have become financially weak, merged, or shifted away from the sector in recent years.

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Recent years have seen more frequent and severe weather-related losses, including Hurricane Ian in 2022 and unnamed storms, resulting in material fluctuations in operating results and surplus levels. To address these challenges, carriers have implemented significant fare increases.

According to the Insurance Information Institute, average homeowners insurance premiums in Florida have doubled, up 102% over the past three years. In 2024, a few companies approaching interest rate adequacy apply for marginal interest rate cuts, providing a more positive signal to the market.

The reinsurance market is difficult for the state

Florida insurers have faced a difficult reinsurance market in recent years. Reinsurers, dealing with large assumed losses due to hurricanes and higher severity of claims due to social and economic inflation, have raised interest rates, reduced production capacity, and pushed for higher insurance retention rates and lower limits.

While reinsurers may be optimistic about the recent damage reforms, the market appears to be in a wait-and-see phase, with capacity remaining flat for mid-year renewals.

Read more: “The Perfect Storm” – How hurricane chaos wreaked havoc on Florida insurance companies

The cost of reinsurance to active personal property professionals in Florida, excluding citizens, more than doubled from $3.1 billion to $6.4 billion between 2019 and 2023. To keep pace with rising reinsurance costs, carriers have dramatically increased their rates, with direct written premiums nearly doubling from $5.9 billion to $11.4 billion by 93.2%.

Despite this growth, direct premiums written did not match the growth in ceded premiums, constraining margins. Non-affiliated ceded premiums increased from 52.3% of direct premiums written in 2019, to 56.3% in 2023.

Underlying carriers may reduce the impact of higher reinsurance costs by modifying coverage, such as reducing limits, increasing retention, or implementing cross-shares. However, these decisions must be made wisely as they also increase retained losses and net exposure.

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