July 23, 2024

Florida property cat can’t help but be well priced at mid-year: Arch

The Florida reinsurance market can’t help but be well-priced for the pending mid-year property cat treaty renewals, global re/insurer Arch Capital believes. 

“Bottom line is we expect the Florida market to be well priced and very good from a risk-adjusted basis,” CEO Marc Grandisson told his company’s first quarter earnings call. 

Inflation and a 2024 outlook for “potentially more activity” on the storm front remain immediate drivers of caution. “I think that people are trying to sort out what they will do,” Grandisson said of the immediate renewal calculus. 

But underlying healing in the long-bruised Florida property cat market is a go-slow event, Grandisson also suggested. 

Reforms enacted by state policymakers “are coming through,” but the time lag to full impact is necessarily longer, Grandisson suggested. 

“It is still the largest property cat exposure for everybody around the world, so even if you make corrections, and they have made corrections, I think we still have a couple years before we start thinking about having any softening in the market,” Grandisson said. 

Florida authorities moved in 2022 and 2023 to help the state’s insurance market, chiefly working tort reforms. Key legislation enacted in December 2022 eliminated assignment of benefits clauses (AOB)  for lawsuits as well as the one-way attorney fee provisions that protected plaintiffs from legal fees.

Critics of Florida’s more liberal prior regime had argued that contractors armed with AOB agreements and backed by an army of lawyers had too much leverage. That left  Florida with an overwhelming 76% majority of the nation’s lawsuits on a small 7% minority of the nation’s claims.

Eventual property cat softening might become palpable “here or there,” Grandisson said, “but we still believe the market will be healthy, as a reinsurer.”

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