Navigating Florida’s dynamic insurance market

David Unsworth, managing director at Howden Re, takes the pulse of the Florida market following the enactment of reforms aimed at curbing legal system abuse.

In recent years, Florida’s legislative framework inadvertently fostered an environment where insureds were able to file excessive or unfounded claims following natural disasters and related insurance events. This claim activity significantly pushed up costs and limited the availability of property insurance, preventing both existing and new entrants from accurately pricing coverage for homeowners in the state.

At the end of 2022, Florida enacted significant legislative reforms to address these issues. These reforms introduced stricter regulations for both customers and insurers, effectively curbing the abuse that had restricted insurance availability in the Sunshine State. As a result, Florida’s insurance legal environment experienced notable improvements, with a more balanced and sustainable operating environment for insurers and reinsurers.

The rising impact of secondary perils

While these necessary reforms improved the legal landscape, it is undeniable that the increasing frequency and intensity of weather events, from severe thunderstorms to flooding and hurricanes, continue to challenge the market. PCS data indicates that losses are rising annually, affecting not only Florida, but the broader US.

From the reinsurance perspective, there is adequate capacity to meet this “new normal”, despite the complexities of varying PCS losses. Events such as hail, convective storms, tornadoes and severe rain require comprehensive, integrated efforts from expert teams to secure appropriate coverage at sustainable prices. At Howden Re, this is facilitated through leveraging a combination of broking, analytics and capital markets expertise to develop industry-leading covers, while being agnostic to the ultimate capital source. Utilizing traditional reinsurance and non-traditional capital, including ILS, clients are once again achieving the levels of capacity they sought to purchase in 2024 at effective attachment points.

The importance of analytics

Collaboration across teams also results in access to a wider range of analytics tools. Secondary perils such as severe thunderstorms and tornadoes are more difficult to model compared to hurricanes and earthquakes, which have established modeling and forecasting frameworks. These perils tend to be more isolated and portfolio-specific, making them harder to predict.

Howden Re’s research and development team plays a pivotal role in helping clients develop their own unique view of risk, combining modeled loss with historical data. Enhanced accumulation tools and individual risk characteristic analysis and insight allow for superior risk selection, aggregation monitoring and precise policy pricing. The better we understand these variables, the more effectively we can unlock the desired reinsurance coverage and capacity for clients.

Looking ahead

As we look to the future, changing weather patterns will continue to pose significant challenges, especially during hyperactive seasons. While current reinsurance capacity remains sufficient, the market must remain adaptable as conditions evolve. The recent legislative reforms in Florida have demonstrated that when reinsurers can accurately quantify and assess their exposures, they are more willing to take on risk. This creates a fertile environment for future growth.

As carriers develop their business plans for 2025 and beyond, demand for reinsurance is expected to increase, especially to protect against secondary peril losses. These challenges are undoubtedly manageable, but will require continued collaboration among, and innovation from, analytics, capital markets and traditional reinsurance broking to ensure a sustainable and profitable market.