Aon Benfield, the world’s premier reinsurance intermediary and capital advisor, has released its latest Reinsurance Market Update and Outlook report, which looks at Florida-influenced reinsurance programs renewing at June 1.
The report also reviews the impact of recent Florida legislative changes and the increased confidence of the State of Florida's hurricane catastrophe fund to raise substantial post-loss financing in the municipal bond market.
The report reveals that while the reinsurance market remains firm for U.S. hurricane risks, catastrophe renewal pricing for Florida-influenced programs is at the mid to lower end of the ranges predicted earlier this year. Aon Benfield estimates that year-on-year rate increases are around 10 to 15 percent.
Bryon Ehrhart, chief executive officer of Aon Benfield Analytics, said: “Despite the significant turmoil in the financial markets since last June, reinsurers maintained the core capital necessary to renew Florida-influenced reinsurance programs at rates that remain accretive to insurers' cost of capital and earnings.”
Mr Ehrhart added: “The reinsurance market for June 1 renewals was orderly. Insurers generally found the capacity necessary to renew their core programs at prices, terms and conditions that were within their expectations and well below the peak pricing witnessed in June 2006.”
Insurers continue to be concerned that the significant loss reimbursements anticipated from Florida's catastrophe fund may not be fully available or made on a timely basis. Many insurers and, in turn, their policyholders have come to rely upon Florida's hurricane catastrophe fund, that provides up to $27 billion of capacity for the 2009 hurricane season. The sheer size of this commitment and the state of the municipal bond market could combine to produce a liquidity crisis for Florida residential insurers and their policyholders.