As if Florida homeowners didn’t have enough to worry about with a monster storm barreling toward its coast, the head of one of the nation’s largest insurance rating companies warned Thursday that Florida’s homeowner’s insurance market is on uncertain footing.
“Hurricane Matthew will test Florida’s previously untested homeowner specialist insurers if there are significantly sizable losses,” said Christopher Grimes, director in insurance at Fitch Ratings in a press release. “With heavy reliance on reinsurance in the Florida property insurance market, traditional and collateralized reinsurance and catastrophe bond markets could also see substantial losses.”
Since the last major hurricane to hit the state was Hurricane Wilma in 2005, Florida’s insurance market has undergone a fundamental restructuring.
Homeowners policies have shifted from large national insurers and Citizens Property Insurance Corporation to newer, small companies focused almost exclusively in Florida.
These companies now hold a 60 percent of Florida homeowners insurance market, the report said. Citizens, the state insurer of last resort, has scaled back from 20 percent of the market share in 2011 to 6 percent by the end of 2015.
The absence of a major hurricane in 11 years helped to strengthen these companies, which reported favorable profitability and surplus growth, Grimes said. But the companies also are “relatively small size and scale,” have concentrated product and geographic profiles and rely heavily on third-party reinsurance to shore-up their capital requirements.
Fitch’s report also warned that “the transfer of underwriting risk from Citizens to Florida specialists adds to the market’s dependence on smaller underwriters with more limited capital levels and access to new capital than Citizens.”
Source: Bradenton Herald