Florida insurers offload losses to Citizens, but still deep in red

Florida-focused insurers cut their underwriting loss by some 15% in 2022 to $1.38 billion, chiefly as the state's insurer of last resort, Citizens, picked up ever more business ahead of Hurricane Ian and moved to its staggering full-year losses.

A group of 50 insurers - the Florida specialists - said to deliver the majority of their business from the Sunshine state suffered the $1.38 billion underwriting loss, a dataset compiled by Gallagher Re indicated.

Their aggregate combined ratio came down by 6.5 percentage points from FY2021, but still pointed to a highly unhealthy 115.3%, the data showed. A notable bulk of that decline is visible in Q4: the group's combined ratio after 9M had been 121.9%.

Their lightly improved faring comes as their aggregate business shrinks, by choice or by insolvency declaration - and clients rush to the arms of the state insurer. Gross written premium for the Florida specialists rose 1.9% year on year, well below the pace of rate change in the insurance-strapped state.

Citizens, for its part, suffered a 15-fold increase in its full-year underwriting loss to $2.45 billion as its business grew 76% as measured in gross written premium. With a huge measure of its 2022 client adds coming just ahead of Hurricane Ian, loss ratios skyrocketed.

Mark the Citizens combined ratio up 113.3 percentage points to an eye-opening 222%.

Citizen's growth has been driven by a Florida market that runs insurers out of business. Southern Fidelity, Avatar P&C, St. Johns Insurance, Weston and FedNat have all gone to receivership in regulator moves. United P&C attempted to bid farewell to southern states on its own, before meeting a similar fate.

Citizens added 386,500 policies to its roster in 2022, a 51% increase that took the firm to a record high policy count dating to points late in 2013. 140,492 of the additions came in Q3, just ahead of Hurricane Ian.

But Citizens is not the only major money loser in the pact. Thirty insurers from the Gallagher Re compilation sport combined ratios over 100%, including eight above 150%.

Underwriting losses in excess of $100 million are visible, albeit including names that have since been wiped from the market. Amongst the survivors, such nine-digit losses came from Privilege Underwriters Reciprocal Exchange, State Farm Florida, American Strategic Insurance and Castle Key Insurance Company.

For the market overall, the after-tax net loss stood at $3.8 billion, including $4.2 billion in underwriting losses, the bulk of which was contributed by Citizens. The overall weighted-average combined ratio increased to 136.1% in 2022 vs. 116.3% in 2021.

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