Florida market in a much better place ahead of renewals but RenRe remains cautious: CEO O’Donnell

Bermuda-based reinsurer RenaissanceRe (RenRe) is seeing additional demand for reinsurance in Florida, but while the company also anticipates good discipline from the market at the June 1 renewals and feels the Florida market is in a better place, it remains cautious.

Speaking recently during RenRe’s Q1 2024 earnings call, executives discussed the Florida market ahead of the June 1st, 2024, reinsurance renewals, which are focused on the state.

“We’re seeing additional demand for reinsurance come to the market, particularly in Florida, driven by a variety of factors including, first, a more attractive primary market with higher underlying rates and growing confidence that recent regulatory reforms that help stabilise the market,” said Kevin J. O’Donnell, President and Chief Executive Officer (CEO).

He went on to note that this has resulted in significant takeouts from the state’s insurer of last resort, Citizens, which should drive additional demand for reinsurance coverage.

Another driver of increased demand in the region, according to O’Donnell, is the fact the reinsurance to assist policy holders, or the wrap layer, has ended.

“We have been reducing exposure to Florida domestics for almost a decade due to their poor financial performance and social inflation issues. Although we believe the market is in a much better place, we remain cautious,” continued the CEO.

Later in the call, O’Donnell was questioned on what needs to happen in Florida for RenRe to become less cautious.

“We think we’ll see elevated demand in Florida, mostly at top layers. Vermeer has certainly an appetite to write some of that, it’s very capital efficient for Vermeer to put that sort of capacity out.

“For RenRe, I would say that with the scale that we have and with the portfolio that we’ve already written, over the last several years we have biased our southeast wind exposure to larger national accounts and away from the Florida accounts, as I mentioned. I think for us to meaningfully shift the portfolio is unlikely regardless of terms, conditions, and pricing changes in Florida,” he explained.

Adding: “I would say we have capacity to put out and if there’s overwhelming opportunity and significant enhanced beyond our expectations rate, we would continue to grow into that market, but that’s not our expectation.”

Expanding on this, David Maura, Executive Vice President, and Group Chief Underwriting Officer (CUO), said that the Bermudian does expect good growth in demand and good discipline from the market in the Florida space.

“As Kevin mentioned, it’s not just Florida, it’s also the nationwides that have Florida exposure. At 1/1 we saw growth in demand in about the high single digit percentages. We would expect going into the 6/1 renewals that we get more growth in demand and that might be 10% to 15%.

“So, we’re optimistic about the ability to create a good portfolio of profitable risk, but we’re approaching it cautiously as we have,” said Maura.

In terms of pricing for Florida risk, the CUO asserted that the expectation at RenRe is that things will trade around the levels seen in 2023.

“There’s positive dynamics with the legal reforms, but those are still unproven following a big cat. The risk is still quite capital intensive and there’s always the potential for high frequency of storms in Florida. So, we think things will trade similar to what they traded for 2023,” said Maura.

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