Nephila’s Velocity Risk Underwriters MGA has filed on behalf of National Specialty with the Florida regulator to seek approval for an average rate increase of 28.1 percent on the HO-3 book of homeowners insurance it writes using the fronting carrier’s paper.

Velocity and Nephila

At 28.1 percent, the request is well above the 15 percent threshold under Florida statute for a public hearing, which has been scheduled for next Friday in Tallahassee.

Velocity writes Florida homeowners business on the paper of State National’s National Specialty, with the fronting carrier thought to cede the risk via a 100 percent quota share to funds managed by its Markel sister company Nephila.

The proposed rate level change in the filing for the so-called voluntary homeowners program compares with a rate level indication of 32.7 percent recommended by actuarial firm Merlinos & Associates.

News of the Velocity-National Specialty filing comes after a public hearing earlier today to consider a request by Capitol Preferred for a 47 percent average rate increase on the homeowners book it acquired when it merged with Southern Fidelity last March.

In December, another Floridian, Edison Insurance Company, was called for a public hearing after filing for a 21.9 percent rate increase aimed at countering escalating loss cost trends in the state, especially from attritional water claims, amid a wave of litigation.

Specialist Florida homeowners carriers are also facing meaningful reinsurance cost increases for the second year in a row at the upcoming 1 June renewal after Irma creep, adding pressure to their operating models.

The pressures – combined with increased debt burdens at many carriers – were behind Demotech’s move last month to warn of downgrade threats for several carriers operating in the state.

Sources have suggested the outcome of the hearings will be a key barometer for the marketplace that could trigger a wave of filings by other homeowners carriers in the state for meaningful rate increases.

Successful outcomes for the carriers will set a precedent for more aggressive rate filings by others and could also wake up legislators to the impact the crisis in the Florida homeowners market is having on consumers as they are hit by significantly higher premiums.

Carriers are likely to use the hearings to spell out the dramatic deterioration in the operating environment they are facing in the Sunshine State.

If insurers are unsuccessful in pushing through the rate increases they say they need, it is likely that there will be more widespread moves to shed business in the more challenging areas of Florida for underwriters.

The Insurer revealed earlier today that Security First is looking to non-renew a portion of its portfolio to cut its wind exposure and PML in the face of higher reinsurance costs.

There is anecdotal evidence of several other homeowners carriers non-renewing or ceasing writing new business in areas of the state.