The market in Florida is doing much better before the contract extensions, but RenRe remains cautious: CEO O'Donnell

Bermuda-based reinsurer RenaissanceRe (RenRe) is seeing additional demand for reinsurance in Florida. Although the company also expects good market discipline in the June 1 renewals and feels the Florida market is in better shape, it remains cautious.

In a recent speech during RenRe's first quarter 2024 earnings conference call, executives discussed the Florida market ahead of the June 1, 2024 reinsurance renewals focused on the state.

“We are seeing additional demand for reinsurance entering the market, particularly in Florida, driven by several factors including, first, a more attractive primary market with higher base rates and growing confidence that recent regulatory reforms are helping to stabilize the market,” said Kevin J. O'Donnell, President and Chief Executive Officer (CEO).

He further noted that this has resulted in significant deductions from the state insurer of last resort, Citizens, which is expected to create additional demand for reinsurance coverage.

Another driver of increased demand in the region, according to O'Donnell, is the fact that reinsurance to support policyholders, the wrap layer, has been discontinued.

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“For nearly a decade, we have been reducing our exposure to Florida nationals due to their poor financial performance and social inflation issues. Although we believe the market is in much better shape, we remain cautious,” the CEO continued.

Later in the conversation, O'Donnell was asked what needs to happen in Florida to make RenRe less cautious.

“We believe we will see increased demand in Florida, particularly in the upper echelons. Vermeer is certainly keen to write some of this, it is very capital efficient for Vermeer to provide such capacity.

“For RenRe, I would say that with the size that we have and with the portfolio that we have already written, over the last few years we have been rebalancing our Southeast wind exposure towards larger national accounts and away from the Florida accounts, like I said.” mentioned. I think it is unlikely that we will meaningfully rebalance the portfolio regardless of the terms, conditions and price changes in Florida,” he said.

Adding: “I would say that we have capacity to achieve something and if there is overwhelming opportunity and a rate of increase well beyond our expectations, we would continue to grow into that market, but that is not our expectation.”

Explaining this, David Maura, Executive Vice President and Group Chief Underwriting Officer (CUO), said Bermuda expects good demand growth and discipline from the Florida area market.

“As Kevin mentioned, Florida is not just in Florida, but nationally. At 1/1 we saw demand growth in the high single-digit percentage range. We assume that when we renew on June 1st. see stronger demand growth, by 10 to 15%.

“So we are optimistic about the ability to build a good portfolio with profitable risk, but we are proceeding cautiously as we have always done,” Maura said.

Regarding the pricing of the Florida risk, the CUO claimed that RenRe expects the situation to be around 2023 levels.

“There is positive momentum in legal reforms, but these are still unproven after a major crisis. The risk is still quite capital intensive and there is always the risk of frequent storms in Florida. “So we assume that the situation will develop similarly to that in 2023,” said Maura.

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