Demotech’s Preliminary Observations on the 2015 Atlantic Hurricane Season

Columbus, Ohio, May 26, 2015: As the 2015 Atlantic hurricane season approaches, Demotech, Inc. releases its preliminary observations related to the preparedness of the 56 Florida property insurers that it reviews and rates.  In the aggregate, these insurers write nearly 60% of Florida’s homeowner’s insurance marketplace.  Although Demotech formally reviews and rates over 400 entities countrywide, the analysis of catastrophe reinsurance is particularly important in coastal areas. According to Joseph L. Petrelli, President, the 2015 reinsurance review and analysis process began immediately after Demotech’s review of year end 2014 financial information, as did the negotiations and deliberations with reinsurers that were undertaken by the fine carriers serving Floridians.

Floridians who are insured with one of these 56 insurers reviewed and rated by Demotech will be pleased to learn the following facts about the preliminary 2015 reinsurance programs of Demotech rated carriers:

  • The 2015 storm season’s final catastrophe reinsurance programs will include sufficient protection to address a first event probable maximum loss to a 100 year event with a second event probable maximum loss to a 1 in 50 year event as determined by modeled results. Demotech also reviews each company’s available multiple event cover beyond first and second events. To put these numbers in perspective, Hurricane Andrew was a 1 in 40 year event.
  • The reinsurers, and other methods of cover, have been reviewed by Demotech as well as other rating agencies or services.
  • The catastrophe reinsurance protection purchased will be based upon a model deemed acceptable by the Florida Commission on Hurricane Loss Projection Methodology.
  • Based on Demotech’s review, the insurers have in place catastrophe response plans reflecting relationships with third party claims adjustment firms or other internal resources to respond to a catastrophic event.
  • The State of Florida Office of Insurance Regulation reviews the reinsurance programs on at least an annual basis.


Petrelli adds “More than twenty years after Andrew struck Florida, many citizens and some of those who author articles on insurance topics remain traumatized by its impact. Clearly, Andrew was a sentinel event for Floridians.  Demotech’s review of reinsurance, including the output of catastrophe models, indicates that insurers are purchasing catastrophe reinsurance, on both a vertical and horizontal level, superior to that purchased in the early 1990s. Based on Demotech’s review, we believe that aggregate reinsurance coverage purchased in 2015 is likely to be sufficient.  Equally as important, the fundamental financial stability of the carriers is excellent.”

According to Barry J. Koestler, Chief Ratings Officer, “In 2014, the purchase of reinsurance represented more than 50% of the premium written by the Florida property carriers that we reviewed.  Even with the soft pricing of reinsurance in 2015 and the attractiveness of alternative mechanisms, our reinsurance requirements should result in a similar impact in 2015.”

Petrelli, an actuary and forty-five year veteran of the insurance industry, sums up his perspective succinctly, “Anyone with an opinion on the financial stability of an insurer who has not undertaken a thorough review of the insurer’s vertical and horizontal catastrophe reinsurance treaties has not considered the pertinent facts.”

About Demotech, Inc.

Demotech, Inc. is a financial analysis firm located in Columbus, Ohio.  Since 1985, Demotech, Inc. has been serving the insurance industry by providing actuarial consulting as well as accurate and proven Financial Stability Ratings® (FSRs) for Property & Casualty insurance companies and Title underwriters. FSRs are a leading indicator of the financial stability of an insurer.  Our rating process provides an objective baseline as well as insight as to the financial stability of an insurer. Demotech levels the playing field by offering FSRs to insurers of all sizes.