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Two other Florida property insurers stopped taking up new business in the state. One of them partly blamed unfair and unexpected price rises from reinsurers this year. The other carrier said that despite reinsurance issues, it is likely to resume writing later in a few months – in the middle of hurricane season.
“We will accept new business applications with effective dates in the fourth quarter and beyond, and look forward to opening to process those applications starting in August,” reads a statement from Centauri Insurance, part of Applied Underwriting. “However, we also expect new business capacity targets for the fourth quarter to fill rapidly, and we may have to stop the influx of new business again for some time.”
Centauri, which includes Centauri National Insurance and Centauri Specialty Insurance, as well as Bankers Insurance, as part of Bankers Financial Corp., launched bulletins to Florida agents in mid – June, announcing the suspension of new business. Centauri said the moratorium was on personal and business commercial lines, with effect on June 15. All Pending Quotes should be bound by closing business on that date.
Centauri said it took the step “to avoid going beyond reinsurance purchases.”
“This is a temporary measure in direct response to a volatile market aimed at ensuring continued fiscal responsibility for our agent partners and customers,” reads Centauri’s memorandum.
Centauri Specialty had 26,000 policies in place at the end of 2021 with $ 79 million in total written premium, the Florida Insurance Regulatory Office reports. Centauri National is not listed in the OIR quarterly report.
Bankers, based in St. Louis, has 27,000 policies. Petersburg, Florida, and also writes in Louisiana and South Carolina. He said he was only suspending personal lines in Florida, effective June 15, but would remain open to commercial lines, risk builders and flood insurance.
“We did not take this decision lightly,” reads the Bankers’ bulletin. “We understand the potential impact of this decision on our agents, and we appreciate your loyalty to Bankers for the past 46 years.”
The ads bring to 10 the number of Florida insurers who stopped writing new business in the state this year. Some of these have become insolvent. One of the larger carriers, Southern Fidelity Insurance Co., suspended a new business in Florida in May, then declared insolvent in mid – June. The People’s Trust, another major property insurer, announced in May that it would suspend homeowners’ policies and dwelling fires. Chief Operating Officer Tom Gallagher recently said the company will resume new business “soon”.
Other carriers did not formally stop writing, but urged agents to avoid new policies in much of the state.
Both Bankers and Centauri maintained an “Exceptional” stability rating from rating agency Demotech, in late March. The AM Best rating service also has rated bankers. It currently lists the firm’s financial stability as “B ++” with a “negative” outlook.
It remains to be seen how suspension of writing may affect future company ratings. Demotech was expected to release new grades this month, possibly suggesting that up to five Florida carriers could downgrade or lose their ratings altogether if they cannot complete their reinsurance programs.
Demotech President Joe Petrelli said the reviews are on track, if a little later than expected.
“While the special session (Florida Legislature) on property insurance ended the reinsurance renewal negotiations somewhat, we are on track to review, confirm or review all FSRs no later than the end of June,” he wrote. in an email last week.
Centauri received a shot in the arm in February 2021 when it was acquired by Applied Underwriters, which is headquartered in Omaha, Nebraska, and operates in the United States and Europe. Centauri has offices in South Carolina and Florida and serves policyholders in Alabama, Florida and Hawaii.
Founded in 1976, Bankers is one of Florida ‘s oldest continuously operating property insurers. Bankers President Rob Menke, in a lengthy interview last week with the Insurance Journal, said he expects the company to be around for at least another 46 years. But the insurer has been losing money on Florida homeowners’ policies for the past five years and Menke said the company’s board of directors is ready to pull out of the state.
Menke, like some Florida insurance executives, blamed claims litigation, exaggerated roof claims and one – way attorney fees in the state for stacking the deck against carriers and multiplying loss costs. However, he added that Bankers felt that with multiple rate hikes over the past two years, they might be able to “seek some profit” in the homeowners’ line this year.
Most Florida insurers expected reinsurance costs to rise, perhaps by about 20% this year. In the end, prices were much higher than for many carriers. Bankers were able to complete their program in June, but at a steep cost and after much uncertainty. Reinsurers said they were waiting to see what the Florida Legislator would produce at their special session before rates and conditions were finalized.
“After that, it became very difficult to get people (reinsurance) to commit to anything that was even remotely reasonable,” Menke said. “Sometimes the terms were just silly: some people wanted 100% of it beforehand. We do not carry credit risk as do some of the others who are about to go out of business. ”
What struck Menke was the apparent level of coordination between insurers, with most of them having the same talking points. He noted that two major reinsurers had acted “in a legitimate manner”. But it was hard to deal with others.
The actions seemed illogical in one sense, he said.
“They have decided that they do not want to take the risk at the lower level and yet the rate is so high that they cannot lose, so I am not sure what the idea is,” he said. . “If I were skeptical, I think it would be some kind of collusion to clear the decks, and maybe it will.”
He added: “It’s interesting how they all came out of the gates after the special session and they all spoke the same language, ‘We have reviewed our view of risk and we no longer want to use models, we want to use experience. ‘”
The actions of this year’s reinsurers suggest that corporations, which are not constrained by Florida insurance regulations, are not entirely equal to struggling Florida carriers – while stacking their own profits, Menke argued.
“If you look at Louisiana and Florida, which are the two hardest states, a dozen or so insurance companies have gone out of business in the last two years,” Menke said. “If you look at reinsurers, I don’t know of one that has gone out of business.”
Bankers this month participated in the Reinsurance to Assist Policyholders, or RAP fund, created by the Florida Legislator in May. It provides a level of reinsurance without cost, lower in case of major losses after a hurricane. Instead of paying premiums to the fund, insurers must provide homeowners with a premium break, which is estimated to be around 3% to 4%.
Menke said the RAP fund is just the beginning but does not go far enough. He argued for a larger, state-backed reinsurance program that would enable insured insurers to avoid the high price increases found in the reinsurance market. The program would not cover all risks, he said, but many might assume that “it keeps the outside market honest.”
Bankers have called for rate increases of about 70% in Florida over the past 24 months and a 40% rate increase is pending before the Florida Insurance Regulatory Office.
“But it’s not enough,” he said. “It simply came to our notice then. I do not want to write any business at a rate that has not been attributed to that extra amount, because we would only write at a loss. We can’t afford to lose money. ”
Bankers will not resume new HO policies in Florida until it sees “light at the end of the tunnel” and can reduce costs, including reinsurance, Menke said.