Florida mass migration to state insurer deeply structural, unabated

Residential insurance policies in the US state of Florida will continue to flow unabated to the state insurer of last resort, Citizens, well in excess of the underlying trend from prior run-ups as in 2007, officials at US brokerage  Brown & Brown have argued.

“More policies will move into Citizens,” CEO J. Powell Brown told his company’s first quarter earnings call. “Right now it is one of the most competitive - and at times one of the only – solutions for insureds.”

It’s more entrenched than prior – even steeper – run ups in Citizen policy counts when adjusted for the much tighter stance being held by Citizens today, Brown said.

Compared to a run-up in Citizen policy counts in 2007, the current increase is coming against much tighter underwriting criteria from the state agency, Brown said.

“Fast forward to 2023 and Citizens has underwriting guidelines and there is not a rate cut,” Brown said in comparison to a 2007 season in which a sudden move to wind mitigation credits gave a massive quick price competitiveness to Citizens.

Citizens is now “actually trying to qualify accounts,” including via resilience standards, versus a 2007 in which “they would write anything, anything.”

Reforms enacted to dethrone Florida as the home of excess litigation need time to reverse the outflow of private capacity, officials argued. “Long-term we believe the changes will be positive,” the CEO said in his opening statement, “but take some time to see improvement.”

Citizens has likewise admitted it won't stem the inflow of new policies in 2023 and may wait several years for recent reforms to fully shift market direction in the stressed southern state. Counts could go from about 1.24 million end-Q1 to 1.5 million end-year, officials have said.

The run-up in policy counts has hovered near the 50% mark since about mid-2022 after a more gradual build-up. fuelled by more than a year of Florida declaring insolvencies and insurers declaring retreats. The current count is a record dating to points in Q4 2013.

In 2007, annual growth rates for Citizens policy counts show from low single digit to 60% within three months, then held above the 50% mark through April 2007.

Comments at the Brown & Brown call were rather directed to fend off concern over Brown & Brown commissions in a state that used to be a core market for the broker. CFO Andrew Watts highlighted differences in which policies can traverse the market and how in addition to the impact of diversification over the past 15 years.

“We are not a Florida-based organisation the way we were at least weighted 15 -20 years ago,” Watts said. “But our Florida business performed very well in the first quarter … We are very pleased.”

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