Florida Insurers Remain Stable Due to Reinsurance Protection: Demotech

Financial analysis firm Demotech has affirmed the financial stability ratings (FSRs) of 51 Florida property insurers after reviewing the quality and quantity of the companies’ reinsurance protection.

Source: Reinsurance News | Published on February 19, 2019

Florida insurance carriers

Based on its compilation of the year-end 2018 financial information of these carriers, Demotech concluded that their reinsurance programs were sufficient to expect reimbursement for outstanding losses and loss adjustment expenses ceded to reinsurers, including insurance-linked securities.

Demotech explained that its affirmation process also reflected realistic estimates of gross and net loss adjustment expense reserves related to claims arising from Hurricanes Irma and Michael.

The firm reported in October 2018 that it believed all the insurers it reviewed were capable of dealing with losses resulting from Hurricane Michael due to their robust capital and reinsurance programs.

Analysts also accounted for the impact of the assignment of benefits situation on net loss and loss adjustment expense reserves, and for expense reserves related to non-catastrophe claims outstanding as of year-end 2018 that were known and incurred but not reported.

Insurers were also required to demonstrate that they were prepared to deal with adverse interpretation of contract wording, and that their policy pricing and rate level analysis were sufficient to earn a reasonable rate of return in 2019.

“Demotech has been actively reviewing and monitoring carriers and critical aspects of Florida’s legislative, judicial, and carrier operating environment at least quarterly basis since 1996,” said Joseph Petrelli, President of Demotech.

“Although many attempt to shape the discussions of the current operating environment based upon the challenges associated with addressing the abuses often applicable to assignment of benefits, our long-tenured, credentialed analysts have the requisite knowledge associated with more than twenty years of the ebb and flow of pricing, loss and loss adjustment expense, coverage interpretations, as well as the evolution and enhancements of catastrophe modeling along with the introduction of alternative capital and the impact on catastrophe reinsurance purchases,” he explained.

“These affirmations reflect the on-going dialogue, communication, and analysis that we have had with management,” Petrelli continued. “Our review process does not start and stop with quarterly statements. Our first quarter 2019 operating results, review of 2019 reinsurance programs, and corporate responses to Florida’s operating environment is a continuous and on-going process.”