Speakers at Insurance Insider US’s first Miami Forum all pointed to signs of stability in the Florida market, echoing this publication’s reports that Florida is closer to its turnaround than it has been for several years.
Florida Citizens CFO Jennifer Montero emphasized the healthier state of the public insurer – citing that in 2021, Citizens depopulated a little over 2,100 policies in the entire year, while in 2024, the carrier depopulated 477,000 policies, the most since 2014.
“Citizens is large when the market is doing really horrible, and the market gets healthier, we get smaller, so watching the depop grow as much as it has is a big indicator that the market, at least for now, is getting better,” said Montero.
For 2025, Citizens is reforecasting its TIV projections as the recent rate increase is coming in lower than expected. Originally, the carrier had expected roughly 300,000 policies to leave Citizens in 2025.
Guy Carpenter's head of NA property center for excellence and Florida segment leader, Randy Fuller, also noted that in 2024, Florida weathered three hurricanes, two of which were major ones. “The market is kind of taking that in stride,” he said, “both on the insurance and reinsurance side”.
Kapil Bhatia, managing director at Raymond James, added that one of the biggest positives and stabilizers in the state is the Florida Hurricane Catastrophe Fund.
“The Cat Fund is kind of like the Sun which gives energy to every insurance company,” he said.
Panelists concurred that the reforms are working, and litigation rates are down, which can be directly linked to the reforms.
Citizens’ litigation rate from 2022 to 2023 was cut in half, with 2024 roughly in line with 2023, the CFO said.
“And that’s while we were growing, so now we’re shrinking, and we expect that to come down even further,” noted Montero.
Fred Karlinsky, chair of Greenberg Traurig’s Global Insurance Regulatory and Transactions Practice Group, emphasized that work is still being done to prevent the reforms from being reversed.
“I equate the insurance industry, in a lot of ways, to the US and the trial bar to the terrorists,” he said.
“Make no mistake about it, we are under attack every day in Tallahassee, and the work we do on behalf of the industry, collectively and getting the message out, is critical.”
Speakers shared the concern that the hard-fought reforms will be pared back or reversed, which would undo the progress made in the state.
Montero added that a large portion of Florida’s legislature is the trial bar, “so to get that reform in the first place was nothing short of miracle”.
“We never thought that was going to happen. So now we're all in like defense mode to just not change it.”
Bhatia continued that instead of thinking reactively, the Florida market has the opportunity to think proactively, but in an optimistic manner, not in a “waiting for the other shoe to drop” kind of way.
“Good things can happen. Let's capitalize on that and see if we can get lucky and build on it,” he said.
Reinsurance
When asked about reinsurance conversations, Montero noted that Citizens has roughly $1.6bn in reinsurance capacity and is looking to secure $4.5bn. She added that typically, the carrier is able to secure around $2bn from traditional reinsurers and taps the capital markets for the rest.
“That’s where capacity is an issue. Last year was a struggle for us because we went out later, and there were three companies, including us, that did cat bonds for over $1bn each, so that eats up the capacity quickly,” she said.
“Pricing is always an issue, so we’ll just leave that there.”
During the fireside chat, Safepoint CFO Steve Hoffman added that the carrier would definitely consider cat bonds for their reinsurance placement and all other avenues.
“When I was in the dating world, my mom always said, ‘Use all available resources.’ I feel the same way about reinsurance. Use all available resources, so that’s cat bonds, broker market, retentions when we can,” he said.
Gallagher Re’s Adam Schwebach noted that the biggest challenge he’s seeing is proving to reinsurers how much better the current operating environment is in the state of Florida and that the reforms are working.
“I think that there's still some work to be done in just getting the word out and demonstrating to the broader reinsurance world that the reforms are real, and they will have a lasting impact,” he said.
Karlinsky added that the market is seeing “the stabilization of the reinsurance marketplace right now, but it's more of a trust but verify situation.”
Capital formation
Panelists pointed out that there are new companies in the state, so capital is coming in. That being said, some of the new carriers since the reforms are subsidiaries of existing carriers with capital.
Bhatia noted that the current macro environment makes raising capital more challenging, but if the Florida market continues to prove itself, he sees that changing.
Schwebach echoed that one of the biggest difficulties he’s seen in capital raising in Florida is the amount – around $25mn to $50mn – “because it’s too small for big people and otherwise it becomes harder to cobble together a number of investors”.
Reciprocals have recently come into vogue again and have been seen as a preferred avenue for those looking to enter the Florida marketplace.
Safepoint has done it successfully twice, once with Cajun Underwriters in Louisiana and another time with Manatee in Florida.
Hoffman highlighted that the carrier started a reciprocal in Louisiana initially because “it was a way to bring in new investors without diluting our primary investor.”
“It wasn't because we thought that reciprocals were this magic thing that was going to cure everybody's problems,” he said.
“We found very quickly that the reciprocal is a marginally better mousetrap. It's not a cure for poor underwriting.”
Hoffman added that the carrier will ultimately transfer all of its admitted business onto one reciprocal or the other.
Fuller continued that the challenge is also maintaining adequate capitalization to cover the risk in the state so that it doesn’t get to another point of crisis.
“As the market stabilizes, it's going to be really challenging to kind of take that longer term view and say, where do things need to be long term for us to maintain stability, so that the next time we have challenges, we're not entering into another insurance crisis.”
Bhatia concurred that Florida needs another good year of minimal losses to build that capital.
California
Some sources have highlighted to this publication that the spillover impact from the southern California wildfires will play a major role in how much reinsurance capacity will be available.
Sources argued that two major aspects to consider on that front include:
Californian insurers will have a greater share of the losses compared to the alternative for a Florida windstorm, due to higher retentions.
Reinsurers will likely derisk from cat in California and will need to deploy cat capacity elsewhere, most likely in Florida.
On the panel, Gallagher Re’s Schwebach noted that every Florida renewals meeting is starting with 10 to 15 minutes on the wildfires, and in turn, Florida looks very attractive.
Bhatia concurred and added, “It sounds counterfactual, but it's right, there is not going to be any reinsurance available for wildfire, not that it was easy to get, but now it's not going to be, so that capital has to go somewhere.”
“And what's better than a state with legislative reform, a modeled peril that’s well understood and people know it, with better pricing?”
In a fireside chat with Colorado Commissioner Michael Conway, he equated the fires to being a similar wakeup call “for us out west” as Hurricane Andrew was to Florida.
He also noted that Colorado is starting a Fair Plan of its own and needs to figure out a solution for stabilizing the market.
For California, Bhatia noted that the state hasn’t really handled the event and is still figuring it out.
“It’s a completely dislocated market right now, and it’s probably going to get further dislocated. The assessments of $1bn is just the starting point.”
He continued that he expects an additional $2bn of assessments, which will be passed through to the policyholders.
“You’re talking about rate increases of assessment of 18% to 20% and then probably around 40% to 50% rate increases, so they should expect a rate increase of around 80%, and even then, markets are going to be unavailable and unaffordable.”
Karlinsky highlighted that California is one of the largest insurance markets in the world, so companies will want to write insurance there, but “that marketplace, from an infrastructure standpoint, to deal with natural catastrophes, is like four decades behind.”