Florida insurer losses spiral after Hurricane Ian

Orderly run-off plans face "uncertainty" for one carrier

Florida insurer losses spiral after Hurricane Ian

Catastrophe & Flood

By Jen Frost

Hurricane Ian has bulked up losses for three Floridian homeowners’ insurers, with one seeing its net loss for the quarter increase tenfold.

The market had already been grappling with profitability before the storm – just two of the 10 largest domestic carriers reported profits in 2021, a phenomenon that has been blamed on a litigation boom in the Sunshine State – and a slew of carrier exits.

Ian, which made landfall as a category four storm in late September, was Florida’s first major storm since 2018’s Michael.

HCI Group, which includes Homeowners Choice and TypTap, saw its net loss shoot from $4.9 million in Q3 2021 to $51.1 million for the same period in 2022.

The storm played a part in a net loss of $70.9 million for United Insurance Holdings, parent company of UPC Insurance, or more than four times its Q3 2021 net loss of $14.3 million.

Heritage Insurance also saw its losses swell, from a net loss of $16.1 million in Q3 2021 to a net loss of $48.2 million for Q3 2022.

UPC Insurance moved to exit its personal lines business in Florida, New York, Louisiana, and Texas in August, blaming in part the withdrawal of its Demotech rating, which led an Insurance Information Institute spokesperson to warn it could be on the “verge of failure”.

UPC said that month that it was looking to an orderly run off for its personal lines business, but these plans could now be in jeopardy.

“Hurricane Ian created new uncertainty related to the viability of our previously announced runoff plan for United Property and Casualty and is clearly a significant risk factor going forward,” UIH chief financial officer and president Bennett Bradford Martz said in a Q3 earnings call.

“Management continues to work closely with its regulators and [is] monitor[ing] developments.”

The business’s personal lines combined ratio soared to 239.9% for the quarter, up on 130.9% for the same period in 2021. Its commercial lines business fared better with a combined ratio of 100.5%, up on 79.8% the same quarter last year.

UPC Insurance had previously forecast a $1 billion gross loss from Ian, and UIH CEO Dan Peed confirmed that non-renewals for its personal lines book are expected to commence from January 1, with the company having gained approval from regulators in Texas, Florida, and Louisiana.

UPC’s claims hit included a $20.1 million knock to its captive reinsurer, with one of its reinsurers having terminated an agreement after the firm’s rating was pulled in August. Return of reinsurance premium of roughly $15 million should offset this to around $5 million, Martz said.

“We expect the Florida market to remain hard for the foreseeable future due to a sceptical and hard capital and reinsurance market, recently elevated catastrophe activity and continued headwinds created by excessive Florida litigation levels,” Peed said.

Ian had a $78 million pre-tax impact on HCI and the business has received more than 12,000 claims.

The gross loss estimate for Homeowners Choice is expected to be $550 million, with a reinsurance tower of $936 million in place. For TypTap, wind losses are anticipated to reach $370 million, with reinsurance arrangements providing up to $610 million in cover.

“Homeowners choice has already secured about three quarters of its Florida reinsurance needs for next year and TypTap is not that far behind,” HCI Group chairman and CEO Paresh Patel told analysts and investors.

HCI’s combined ratio hit 177.9% for the quarter, versus 112.2% in Q3 2021.

Heritage’s Q3 catastrophe weather losses were $40 million, up 150.5% from $16 million in Q3 2021 and driven by the storm.

A reduction in policy count for Florida personal lines business continues to be a “key focus” for Heritage Insurance Holdings and this will continue “if meaningful legislation to reduce abusive claims practices does not occur”, the business said.

Its Florida personal lines policy count “intentionally declined” 18.8% year-on-year.

Its net combined ratio was 133.3% for the quarter, compared to 112.5% in Q3 2021.

“We continue to de-risk products or geographies which are not producing appropriate margins, which includes being more selective on both new and renewal business,” said Heritage CEO Ernie Garateix.

Global and national carriers have reported Ian losses into the hundreds of millions. Insured losses from the storm could be between $53 billion and $74 billion, RMS said in October.

Allstate saw cat losses for Q3 of $763 million and said that approximately 80% – or $360 million – of its $450 million September cat losses stemmed from the hurricane. Progressive reported a $290 million impact on special lines, as well as a $1.4 billion property impact on a direct basis of which the insurer is expected to retain about $200 million.

Liberty Mutual reported an $835 million Ian hit, Zurich saw a pre-tax impact of $550 million, and AIG took a $450 million Q3 dent.

Reinsurer Munich Re has predicted a €1.6 billion ($1.66 billion) catastrophe dent from the deadly hurricane. 

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