Florida is the US state with the most premiums in home insurance lines, AM Best analysts have revealed.
Despite being only the third most populous state, it generated $12.4 billion in direct homeowner bonuses in 2021. That’s more than California, the most populous state, with 11, $2 billion in direct homeowner bonuses, and the second most populous Texas at $11.9 billion. , according to BestLink.
Analysts have pointed out that Florida’s storm-prone location and tough litigation environment keep it at the forefront among U.S. states for losses and the cost of home insurance.
AM Best said: “The total direct premium for owners’ carriers in Florida continues to grow, increasing 11.7% from 2020 to 2021. Florida’s rise was the fourth largest year-over-year percentage increase in 2021. , behind California and the fast-growing Idaho and Montana. The direct premium for owner carriers, in total in the United States, reached $119.7 billion in 2021, an increase of 8.4% compared to 2020.
Analysts also found that due to market dynamics over the past year, some carriers have had to reassess their approach to Florida real estate risk.
For example, in July 2022, Bankers Insurance Group announced that it was filing an application to exit the business of owners in Florida, citing in a letter its concerns about maintaining its ability to meet the requirements of sponsored companies by the government, such as Fannie Mae and Freddie Mac.
Shareholder-owned GSEs have been licensed by the US Congress to facilitate mortgage and agricultural lending, including the Federal National Mortgage Association, commonly referred to as Fannie Mae and Federal Home Loan Mortgage Corporation, or Freddie Mac. They incorporate references to AM Best designations in their insurance evaluation documents.
Freddie Mac establishes a requirement that AM’s top-rated insurers and reinsurers must possess a financial strength rating of B+ or better, and non-admitted insurers must hold a minimum rating of A (Excellent).
Fannie Mae requires insurers and reinsurers with the highest AM ratings to hold an FSR of B (Fair) or better.
Bankers Insurance Group is not alone in deciding to pull out of the Florida homeowners market, as it has been joined by 13 other companies that have stopped underwriting homeowners insurance in the state this year, according to Mark Friedlander of the Insurance Information Institute.
Three have since become insolvent, Friedlander added. Of the remaining 10, three said they were voluntarily leaving homeowners’ lines in Florida.
The other seven called the moratorium on new business temporary but did not say when they might resume writing. Many cite the state’s legislative inaction to dissuade trial attorneys from taking action against real estate carriers, Friedlander said.
The rating agency also noted how dependent insurers operating in Florida are on reinsurance. AM Best said, “Each year, insurers operating in the Sunshine State cede billions of dollars in reinsurance premiums.
“Deal retention rates, defined as the percentage of a company’s raw paperwork that is retained for its own account, range from low numbers to 100%. Much of Florida’s reinsurance support comes from Bermuda-based reinsurers.
He added, “AM Best defines Florida personal property specialists as Florida-domiciled regional insurers with predominant exposures to Florida personal property insurance. The commentary revealed that “Florida personal property specialists show significantly higher reliance on reinsurance than the industry average.”