COVID-19 Adding to the Challenges Facing Florida Property Insurers

The COVID-19 pandemic is adding to the challenges of Florida property insurers, who were already dealing with the pressures of higher reinsurance pricing and social inflation, according to A.M. Best.

The combined pressures are challenging the financial strength of Florida personal property insurers and are having an impact on coverage availability and affordability in the state, A.M. Best said in a new Best's Market Segment Report, Multiple Threats Flank the Florida Property Insurance Market.

The report says that despite the absence of a major hurricane in 2019, the combined ratio of 51 Florida-domiciled personal property insurers analyzed—excluding Citizens Property Insurance Corporation—was 107.7, remaining essentially flat compared with 2017–2018 when two major hurricanes made landfall.

A.M. Best noted that reinsurers have been increasing Florida property rates by 25 percent or more, with individual company rates varying considerably based on loss experience, risk appetite, and financial condition.

"Reinsurers have incurred considerable assumed losses in the past several years, owing to hurricane activity and rising claims severity brought on by social inflation," Chris Draghi, senior financial analyst at A.M. Best, said in a statement announcing the findings.

A.M. Best said it expects the COVID-19 pandemic's impact on Florida property insurers to be moderate given that most insurers writing commercial policies require physical loss or have exclusionary language for viruses. The economic downturn related to the pandemic, however, has the potential to influence premium collection, which would affect cash flow and liquidity, the rating agency said.

An increase in storm activity could lead to more accumulated insured losses, A.M. Best noted, and the COVID-19 crisis has the potential to amplify damages.