Demand for reinsurance set to increase in low tax coastal US states: Stonybrook

“As low-tax states such as Florida, Texas and New Hampshire continue to grow in both population and home prices, their demand for reinsurance will increase,” according to a white paper by Stonybrook on the coastal homeowners market.

The white paper noted that 2020 was a very active year for the coastal homeowners market, with 2021 showing signs of a similarly high level of activity. There were five coastal M&A deals in 2020, with four of the targets having Florida as their primary state.

There has been one deal so far in 2021, in January, with Porch acquiring Homeowners of America in Texas.

“A continuing trend has been that the larger national carriers are shying away from coastal exposures, particularly in Florida and New England, where smaller, regionally focused carriers have higher market shares,” the white paper observed.

Stonybrook noted that major storm losses have historically impacted Florida to a disproportionate extent, with nine out of 28 storms, or 32 percent, affecting that state, compared to 29 percent in Texas and 11 percent in Louisiana - a state which saw a record of five named storm landfalls in 2020.

“The Florida carriers are particularly challenged as regulators and rating agencies have tightened their standards following several years of poor results,” the white paper added.

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