Midwest property insurance market faces 'disruption' – Orion180 CEO

Plus, what Florida is doing right

Midwest property insurance market faces 'disruption' – Orion180 CEO

Catastrophe & Flood

By Gia Snape

Turbulence in the Midwest property insurance markets is expected this year, according to the CEO of Orion 180, which is expanding in the region and recently became a full-stack carrier.

Kenn Gregg, Orion 180 CEO, said he expects disruption as reinsurance rates catch up with carriers.

“You’ve had a number of years where severe convective storms and other events that were unexpected, from a reinsurance standpoint,” he told Insurance Business.

“Many companies in the Northeast just got significant rate increases, which the Southeast experienced in the span of the last two to three years, but they got it in one year because [the reinsurance companies] needed to get them up to current pace.”

Losses from severe convective storms

Severe convective storms (SCS), which range from thunderstorms with lightning, to tornadoes, hail, or dangerous straight-line windstorms, are traditionally considered secondary perils. But losses have steadily increased due to a high frequency of medium-sized events.

Outbreaks of SCS caused $29 billion in global insured losses in 2022, marking the fourth-costliest year on record, according to Aon’s latest weather, climate, and catastrophe insight report. This is compared to $26.7 billion in 2021.

A large majority (78%) of SCS losses last year occurred in the US, making it the SCS loss capital of the world. Storms in the US Midwest alone caused several billions in losses, Aon’s data showed.

SCS are especially prevalent in the so-called “tornado alley,” which includes portions of Texas, Oklahoma, South Dakota, and Nebraska.

Staggering claims have caused reinsurers to retreat from disaster-prone locations, driving up rates and reducing capacity for already-burdened insurers.

Gregg, however, is confident about moving forward despite the uncertainty. In an interview with Insurance Business, the CEO shared the motivations behind Orion180’s transition to a standalone carrier, as well as their growth plans.

The surplus lines carrier began writing non-admitted homeowners’ insurance in coastal areas of Alabama, Mississippi, and South Carolina in December 2022. It also has state approval pending in North Carolina.

“Our experience, technology, and solutions will give us the ability to provide a very nice alternative to the agent base and consumers in the Midwest as we continue to grow our book,” he said.

Orion180 will soon step into Indiana, Ohio, and Michigan, with aims to become a national insurance provider. It is headquartered in Florida and is also eyeing expansion in the state later this year.

Florida ‘headed toward viability’

Despite a rash of insolvencies from insurers there in recent months, Gregg, whose firm is headquartered in the Sunshine State, is optimistic about the Florida property insurance market’s future viability.

He’s not the only one seeing a rosier picture: ratings agency Demotech recently hailed major legislative reforms in the state, saying the new guidelines have “redefined” the market for the better.

“Florida did a nice job with the reforms,” agreed Gregg. “The reality was [the previous dynamic] was hurting the market because the premiums were going up.”

Homeowner rates in Florida are at nearly three times the national average. The state also accounts for more than three-quarters of the US’ homeowners’ insurance lawsuits.

The reforms passed by Florida’s legislature last December are geared toward reining in Florida’s lawsuit abuse problems and reducing cost drivers for fraud.

“The insurance companies were absorbing losses but also needed pass it on to consumers – the only two parties that were truly benefiting in the Florida market were the attorneys and the contractors,” said Gregg.

“I think Florida recognized that, finally made it right, and did a nice job of it. In our opinion, Florida will work its way to being a viable market going forward.”

What do you think of Gregg’s assessment of the Midwest and Florida property markets? Share your thoughts below.

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