Florida fails to calm nerves; messy June renewals give lift-off to rates

June reinsurance renewals are a messy affair of skyrocketing rates and escapist capacity as Florida apparently failed to calm nerves with its last-minute legislative crunch, insiders have been telling markets.

“Florida renewals look disorderly,” analysts at the Berenberg investment bank are warning investors following talks with insiders to the process at  Beazley,  Conduit Re,  Hiscox and  Lancashire.

Rates will likely end the renewals season with gains of neighbourhood 20-30% “as a lack of reinsurance capital – including the pullback of alternative capital – is driving a capacity crunch.”

“We understand that primary local insurers are struggling to place their reinsurance programmes as there is little appetite for accepting the risk, particularly across lower layers of programmes, which points to a traditional hard market amid market dislocation,” analysts wrote.

Florida policy makers may have worked too late to calm reinsurer nerves, Berenberg analysts Tryfonas Spyrou and Kathryn Fear suggested of the take from the talks.

Players are said to be "cautious" on the question of whether legislation actually solved the operative problems.

Insiders to the big four London players apparently pointed to issues with claims fraud and resultant litigation from assignment of benefits (AOB) practises, which allow policyholders to pass on the insurance claims to the contractors.

Even fundamental issues like core counterparty risk are factoring into dealmaking, Berenberg said of reinsurer sentiment following recent primary carrier bankruptcies and profitability issues.

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