RenaissanceRe sees strong renewal in Florida, but is still not tempted

Renaissance Re are unlikely to be tempted to delve deeper into the Florida real estate industry, despite the prospect of double-digit demand increases and strong prices, senior officials said.

“While we believe the market is in much better shape, we remain cautious,” CEO Kevin O'Donnell said on his company's first-quarter earnings call.

He pointed to “nearly a decade” of reduced presence among the smaller local players that dominate the Florida homeowner market and have not yet crossed the RenaissanceRe threshold.

The broader US real estate market, due for renewal in the middle of the year, can maintain current levels. “We believe the situation will be similar to what we have seen since 2023,” added Chief Underwriting Officer David Marra.

RenaissanceRe's more recent strategy has been to increase its focus on wind risk in the southeastern U.S. by partnering with large national players that do not have as large a presence in Florida.

It remains “unlikely” that RenaissanceRe will change that stance today, regardless of any changes in rates, terms or conditions, he said.

ILS division Vermeer, which manages capital for the Dutch pension system, “is certainly interested in providing such capacity,” but O'Donnell noted of the fund, which is aimed at remote layers of the U.S. real estate industry.

RenaissanceRe's caution toward Florida comes despite a generally strong interest in real estate companies in the group.

“We still achieve an excess return compared to the others [non-cat] “We’re focused on that,” O’Donnell said.

But Florida could do well given mid-year reinsurance renewals, O'Donnell and other top officials admit. Demand has increased and discipline should defend prices.

“We expect good growth and demand and good discipline from the market,” Marra said in comments that appeared to be aimed beyond Florida at the broader 6.1 refreshes.

The high single-digit demand growth seen in the 1.1 renewals could shift things up a gear. “We would expect more,” Marra said, “maybe 10-15%.”

“We are optimistic that we can make a good profit at an appropriate level of risk,” Marra said.

The demand growth is particularly visible on rooftop towers, which fits well with reinsurers' appetite, he said.

In Florida in particular, demand growth appears particularly likely given the recovery in the primary market. The state residual market insurer's policy conclusions indicate reinsurance demand from the private sector. Eliminating a federally mandated layer of reinsurance also improves the outlook for the private reinsurance market, O'Donnell said.

But “caution” does not mean withdrawing from existing partners in the Atlantic hurricane cat market, O'Donnell emphasized in his opening comments during a lengthy look at the outlook for the 2024 season.

“The possibility of an increased hurricane season is not a risk that we transfer to our customers,” he said. RenaissanceRe otherwise strengthens resilience.

Some of the improvements in Florida's home insurance market can be attributed to legislative reforms.

O'Donnell is “confident that recent regulatory reforms have helped stabilize the market.”

Florida authorities took actions in 2022 and 2023 to support the state's insurance market, particularly through tort reform. Major legislation passed in December 2022 eliminated assignment of benefits (AOB) clauses for lawsuits as well as the one-sided attorney fee provisions that protected plaintiffs from attorney fees.

Critics of Florida's more liberal previous regime had argued that contractors armed with AOB agreements and backed by an army of lawyers would have too much influence. This left Florida with an overwhelming majority of 76% of the statewide lawsuits out of a small minority of 7% of the statewide lawsuits.

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Anna Harden

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