Florida insurance companies are “locked and loaded” for hurricane season June 1, one ratings firm says, while another emphasizes the market is full of small, untested companies.
“Never in the history of the state of Florida has the domestic market had more or better reinsurance protection,” said Joseph L. Petrelli, president of Demotech Inc.
His statement Friday refers to back-up protection that companies buy, often from offshore firms, to help them pay claims.
“Carriers are purchasing protection at unprecedented levels to protect consumers from not only a large storm, but a series of storms,” he said.
But Fitch Ratings lists that same reliance on third-party reinsurance as a reason for caution.
Many Florida-based companies “are unlikely to achieve ‘A’ category” in Fitch Insurer Financial Strength ratings, the ratings firm said in a statement. “Limiting factors that influence ratings include relatively small size and scale, concentrated product and geographic profiles, heavy reliance on third-party reinsurance and concerns regarding capital adequacy given catastrophe exposure,” the Fitch statement said.
“It’s not a question of if these Florida homeowner specialists will be tested by a hurricane but rather when the next catastrophe strikes will they be prepared to handle a significant increase in claims volume,” said Fitch’s Christopher Grimes.
The tone is different with Demotech about what happens if the state’s decade-long break from a hurricane hit comes to an end.
“No one knows when the next hurricane will make landfall,” Petrelli said. “However, Florida’s domestics are ready to respond.”