The well-documented woes of the Florida homeowners market might not paint a picture of a burgeoning opportunity for new entrants, but a number of recent developments point to fresh interest in the Sunshine State.


Last week The Insurer broke news of a proposed Florida reciprocal exchange JV between Orchid and Homesite that is believed to be at an advanced stage ahead of a launch this summer.

Its target is the higher end of the regular homeowners market, or the lower end of the high net worth market in the Sunshine State, depending on your perspective.

According to regulatory filings, Trusted Resource Underwriters Exchange (TRUE) is looking to offer HO3 and HO5 policies to provide coverage for homes valued in the $400,000 to $2mn range.

Towerbrook-backed MGA Orchid is already active on an E&S basis in Florida and other cat-exposed states.

But the involvement of US insurer American Family’s Homesite operation suggests an appetite to access Florida cat risk without exposing its own balance sheet to the other risks of doing business in a state where carriers have been battered by a wave of litigious claims over the last few years.

The reciprocal exchange model has similarities with a mutual, with policyholders also members from whom a portion of premiums is set aside to build up surplus. Sponsors typically provide some form of initial capital and invest in the managing entity that charges a fee for underwriting and administering the business.

Of course, Florida famously saw an exodus of larger carriers from its homeowners market after the heavy hurricane losses of the mid-2000s. The phenomenon shaped its current marketplace, with 50+ specialty Florida homeowners carriers heavily supported by reinsurers and a large residual insurer in Citizens.

Citizens is expected to grow through the end of 2020

The compounding effect of recent active years for hurricane losses and litigation fueled claims activity has created a loss-making environment for most carriers. And the significant increase in reinsurance costs at this year’s renewal – coming on top of higher prices last year – has challenged the operating model of some smaller players.

That is leading to two outcomes that might explain some of the interest of starting up in Florida now.

Incumbents are shedding business. There is already tangible evidence of that in the growing policy count at Citizens. Business is being shed from particularly challenging counties, but also from areas where homeowners carriers have trimmed back to try and manage down PMLs.

And original pricing is going up. The last 12 months have seen a wave of filings for significantly higher rates as insurers try and get ahead of loss cost trends. Many of the most recent filings have been for well above 15 percent.

There is a lag between filings and higher premium rates earning in of as much as 18 months through the renewal cycle.

For a new player targeting higher value homes that is unencumbered by deteriorating prior-year losses and is making start-up rate filings on the crest of a hardening wave the economics and growth opportunity may be compelling, even in the face of high reinsurance costs.

That may also explain the interest expressed by another homeowners MGA, Hippo, in making a play for Florida.

The insurtech is awaiting approval for its acquisition of fronting carrier Spinnaker and has already expressed a desire to expand that platform, including a potential Demotech-rated subsidiary.

One-and-a-half swallows doesn’t make a summer but, for some at least, the Florida outlook looks sunnier.