Coral Gables, May 10, 2024 – SL FINANCIAL is an actuarial consulting and advisory firm based in Miami, Florida. We offer actuarial consulting and advisory services for businesses and governments in both traditional (re)insurance and alternative risk financing industries.

The Florida property insurance market has been battling excessive costs and limited availability. While the 2023 tort reform package aimed to address this, a big question remains: how will it affect reinsurance rates on June 1, 2024?

Positive Signs from FHCF and Citizens

SL FINANCIAL’s analysis of the proposed 2024 Florida Hurricane Catastrophe Fund (FHCF) rates reveal a promising trend for property insurers. The FHCF, the state's reinsurer, serves as a key benchmark for reinsurance costs. Here is what makes this analysis encouraging:

• Decreasing Rates for Reinsured Units: A significant portion (70% in 2024/2025) are expected to see a decrease in rates, ranging from -5% to -23%.
• Stronger Decrease Compared to Last Year: This decrease is even more notable when compared to 2023/2024, where 85% of units saw a decrease of -5% to -16%.
• Shifting Landscape: In contrast, 2022/2023 saw substantial increases for 90% of units (ranging from +5% to +43%). This shift towards lower rates suggests private insurers might also benefit from cost savings when their reinsurance contracts renew on June 1st.

Citizens Property Insurance Corporation (Citizens), the state-backed insurer of last resort, adds another layer of optimism. They expect their reinsurance renewal to be flat to slightly down (-5%) despite facing an increase in exposure and a recent rise in depopulation activity (policyholders leaving Citizens to join private insurers). This suggests two key things:

• Tort Reform Impact: The expectation of stable or even lower reinsurance costs for Citizens indicates a potential positive impact from the recent tort reforms. These reforms might reduce litigation costs and make Florida a more attractive market for reinsurers.
• Reinsurance Capacity: Citizens' promising renewal, coupled with the FHCF analysis, suggests sufficient reinsurance capacity might be available in the market. This could lead to more competitive pricing for private insurers come June 1st.

This combined evidence from both Citizens and the FHCF strengthens the case for potential price stabilization or even slight decreases for homeowners' insurance premiums.

Recent Rate Filings

A review of insurers' rate filings submitted between January 1 and April 30, 2024, reveals mixed signals regarding the impact of tort reform.

• While insurers requested some rate increases (average approval around 9%), the adjustment factors used to assess the reform's cumulative effect remained near 1.00.
• This suggests at least two possibilities: insurers may lack sufficient data to accurately gauge the reform's impact on future claims costs, or they may not anticipate major changes compared to late 2023.

Interestingly, only one filing out of those reviewed projected an adjustment factor below 1.00 for future years, indicating their anticipation of cost savings from the reforms.

Impact on Homeowners

While price increases are still expected, the overall trend suggests they might be less severe than pre or immediate post-reform. If these positive signs hold true for private insurers on June 1st, 2024 (their reinsurance renewal date), it could lead to some much-needed price stabilization or even slight decreases for homeowners' insurance premiums.

Tort Reform: A Potential Game Changer

SL FINANCIAL unpacked the potential ramifications of Florida's sweeping 2023 tort reform law in a prior, in-depth analysis. The legislation targeted curbing frivolous lawsuits and expediting claims processing for homeowners' insurance. Among the reforms' key provisions were the elimination of one-sided attorney fees and an overhaul of comparative negligence standards. These changes were anticipated to reduce litigation costs and potentially stabilize homeowners' insurance premiums.

Looking Ahead: Cautious Optimism

While the FHCF's proposed rates and Citizens’  experience offers promising signs, a few factors warrant caution:

• Time for Impact: The full impact of tort reform might take time to materialize as lawsuits filed before the reforms work their way through the legal system.
• Exposure Increase: Even with reduced litigation costs, rising property values and hurricane risks will likely still exert upward pressure on reinsurance prices.

While the positive signs from the FHCF, Citizens, and recent trends are encouraging, navigating the evolving reinsurance landscape still requires a measured approach. Here at SL FINANCIAL, we predict a stable Florida 6/1 reinsurance renewal, but caution that some factors, like the full impact of tort reform and rising exposure, may still influence pricing. SL FINANCIAL’s expertise in both the Florida market and global reinsurance (including Bermuda) could help you:

• Navigate the evolving reinsurance landscape in light of Florida's tort reforms.
• Develop a data-driven reinsurance strategy that maximizes cost savings.
• Secure optimal terms and pricing from reinsurers.

For any question or media inquiry, please visit our website at www.sl-financial.com or contact our team at that ceo@sl-financial.com.

MEDIA CONTACT

Achille Sime

CEO

ceo@sl-financial.com

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