Demotech rated carriers may contain Ian loss within reinsurance towers: Petrelli

Based on the information available at this time, an analysis of Florida insurance carriers rated by Demotech suggests that they may all be able to contain losses from hurricane Ian within their reinsurance towers, according to President and Co-Founder Joseph Petrelli.

The rating agency provided an update on the status of its Financial Stability Rating reviews of Florida-focused insurance carriers after hurricane Ian.

One of the concerns has been whether a major catastrophe loss event could blow through some insurers reinsurance arrangements, but so far the data suggests this may not occur, Petrelli of Demotech said.

He explained, “The efficacy of catastrophe reinsurance programs, disaster recovery plans, and catastrophe response plans is being validated.

“Although we cannot share material non-public information, we are pleased to report that, as of this date, based upon catastrophe modeling results and the early reporting of claims associated with Ian, each carrier reviewed and rated by Demotech is within their vertical reinsurance tower.”

Which suggests that losses will fall within their reinsurance limits, with reinsurance capital once again demonstrating just how vital it is to the business model of insurers in the state.

However, speaking with Artemis, Petrelli cautioned that the road ahead may not be so easy for the Florida-focused insurers, with even harder reinsurance market conditions likely to add more pressure.

“As to the impact of Ian losses and LAE on reinsurance rates, as well as other global disasters, carriers whose business models depend on the quality and quantity of reinsurance are likely looking at disruptively increased reinsurance renewal revisions in 2023,” he told us.

Which makes progress on reforming the insurance system in Florida to stem litigation all the more important and urgent.

It is one lever that could be pulled that might at least reduce some of the pressures on the Florida insurers, while also perhaps moderating just how hard Florida focused wind reinsurance rates can get.

“Even if the State of Florida secures legislative reforms to move its percentage of countrywide homeowners (HO) insurance litigation on open claims, from 75% – 80% toward its 8% of countrywide open HO claims, the 500,000 plus claims from Ian remain ‘pigs in the python’,” Petrelli said.

Read all of our coverage of hurricane Ian, and our analysis on the potential market losses, here.

Read all of our news and analysis on the Florida insurance and reinsurance market.