Demotech: Revised Business Models and Operating Plans will Affect Consumers and Availability in Florida Insurance Market

Columbus, Ohio, May 19, 2020: Prior to COVID-19 being thrust into the mix, Demotech concluded that 2020 would not be “business as usual” for Florida focused insurers. Demotech identified jurisdictional risk, the competitive position of Citizens Property Insurance Corporation, and increases in the cost of catastrophe reinsurance, including the limited interest of those offering catastrophe reinsurance, as some of the complications.  It was clear that carriers would be relying on the execution of business models and prudent adaptations to their operating plans in the future.

Having been involved in Florida’s residential property insurance marketplace since 1996, our view is that the financial and market-based criteria affecting residential property insurance have never been more difficult to navigate. Moreover, insurers and the reinsurers that support them have responded to eleven tropical storms and eight hurricanes over the period 2016 through 2019 in addition to the added effort and expense of dealing with COVID-19.

Absent legislative reforms in 2019, changes in business models and operating plans have been announced by Capitol Preferred Insurance Company, People’s Trust Insurance Company, and Avatar Property and Casualty Insurance Company. Demotech anticipated these efforts.  Stakeholders should expect similar responses from other carriers.

According to Joseph Petrelli, ACAS, MAAA, President and co-founder of Demotech, “As of this date, Demotech has reviewed each of the preliminary proposed reinsurance programs for the June 1, 2020 through May 31, 2021 storm season. Reviews of final programs will follow shortly to evaluate vertical and horizontal limits purchased, the reinsurers assigned to each treaty, and the impact of the actual cost of reinsurance on the carriers’ operations.”

Bob Warren, CPCU, CPA, Client Services Manager, noted, “I have contacted each carrier to schedule a conference call. The purpose of each call is three-fold: a review the final CAT program, discussion of first quarter results, and a review of the financial projection for the balance of 2020.  We will issue affirmations as soon as these aspects of carrier analysis have been reviewed.”

“Our review and analysis process is consistent with prior periods with adaptation of our process to reflect the emerging impact of COVID-19 as well as the affordability and availability of reinsurance associated with 2020 renewals,” said Barry J. Koestler, II, CFA, Chief Ratings Officer.

Brian O’Neill, Partner-Client Executive, TigerRisk, an experienced and respected reinsurance professional well known to carriers, reinsurers, and other stakeholders, summarized the 2020 catastrophe reinsurance renewal season in this way, “We have not experienced market conditions like we are seeing this year since 2006. We are a supply and demand economy, and given the shortage of retro cover available (especially low attaching cover), the loss creep from Irma and to some degree Michael, the lack of legislative reforms to fix the one way attorney fee statutes in the state, and then throw in a Global Pandemic – you have a perfect storm hitting the June 1st renewals.

The carriers in the state are truly performing their best to weather this storm. Support from core reinsurance partners will be critical in this environment along with creating unique risk management solutions and raising reinsurance capacity to optimally manage each carrier’s operational and financial needs.”

Although Yogi Berra uttered his most famous idiom during the 1973 National League pennant race between his Mets and the Cincinnati Reds, he could have been describing the continuous review and analysis of Florida focused residential property insurance carriers when he said “It ain’t over til it’s over.”

About Demotech, Inc.

Demotech, Inc. is a financial analysis firm specializing in evaluating the financial stability of regional and specialty insurers.  Since 1985, Demotech has served the insurance industry by assigning accurate, reliable, and proven Financial Stability Ratings® (FSRs) for Property & Casualty insurers and Title underwriters.  FSRs are a leading indicator of financial stability, providing an objective baseline of the future solvency of an insurer.  Demotech’s philosophy is to review and evaluate insurers based on their area of focus and execution of their business model rather than solely on financial size.  Visit for more information.