Hurricane Ian exacerbates misery for Florida’s weary P&C players

The devastation of Hurricane Ian has added to the financial strain under which the companies that make up Florida’s troubled home residential insurance market currently operate.

Those private insurers, including national companies but excluding state-owned Citizens Property Insurance Corp., have collectively lost $1.2 billion through the first nine months of 2022, with about $900 million of the total in the third quarter. This year’s aggregate net income losses have already surpassed the prior-year total of $1.02 billion, which includes several insurers that are now insolvent.

Mounting losses are depleting some insurers’ excess positions, which could further affect their ability to write new business or renew existing ones and may require an additional capital injection.

surplus erosion

The nation’s two largest homeowners insurers have seen their Florida-based unit policyholder surplus decline by more than $100 million since early 2022.

The largest decline in policyholder surplus to date among Florida private insurers occurred within State Farm Florida Insurance Co. The insurer reported policyholder surplus of $634.2 million at the end of the third quarter of 2022, a decrease of approximately $282 million from the end of the previous year.

Allstate Corp.’s Castle Key Insurance Co., one of the insurer’s subsidiaries that only writes business in The Sunshine State, has seen its surplus fall by $122.1 million over the course of the nine-month period. Its policyholder surplus was $142.6 million at the end of September, compared with $264.7 million as of December 31, 2021.

ASI Preferred Insurance Corp., a unit of The Progressive Corp., has seen its surplus decline by $70.8 million over the nine-month period to $49.4 million at the end of the third quarter. Its excess amount was helped by a paid-in capital contribution of almost $21 million during the most recent quarter.

The insurer may need further capital contributions to prevent its risk-based capital ratio from falling below the required control level. Other things being equal, comparing ASI Preferred’s surplus of $49.4 million to its authorized control level risk-based capital of $33.0 million at year-end 2021 would put its calculated risk-based capital ratio at approximately 150%. A risk-based capital ratio below 200% would put ASI Preferred in the company’s stock level.

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Net Combined Index Soars for ASI

In addition, ASI Preferred’s 2022 combined year-to-date ratio has increased to 508.8% from just 102.9% during the prior year period. The insurer reported net written premiums of $28.8 million for the first nine months of 2022, compared to $418.2 million of direct premiums for the same period. ASI Preferred assigns most of its premiums to other Progressive affiliated subsidiaries.

Citizens, the state insurer of last resort, had a net combined ratio of 263.7% for the nine months ending September 30. Citizens has experienced massive growth within its customer base, bringing its direct written premiums to $2.40 billion so far in 2022, an increase of 77.6% over the prior year period.

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Another special legislative session

Florida’s state legislature met for a special session this week, the second time this year, with the goal of reforming the private insurance market. The bill, which has passed both the Florida House of Representatives and Senate, would create a reinsurance assistance program to help insurers deal with renewing their coverage, eliminate one-way attorney fees and prohibit the “allocation of benefits”. It would also require insurers to improve their methods of investigating and paying claims.

The American Property Casualty Insurance Association, or APCIA, encouraged Florida Governor Ron DeSantis to act quickly and enact the legislation.

“Rampant abuse of the legal system has caused insurance costs to skyrocket and burdened Florida families, and we applaud lawmakers for tackling this issue head-on to help stabilize the market,” said Logan McFaddin, Vice President of APCIA state government relations, in a statement. statement.