The American International Corporation (AIG) told its distribution partners in March that it would stop programs that do not acknowledge personal assets, written on redundant paper and surplus (E&S) by its subsidiary Lexington Insurance Company.
Boston-based insurer Lexington began its divestment shortly thereafter by announcing its withdrawal from the Florida homeowner insurance market, leaving about 8,000 high-net worth and complex risk homeowners in the Sunshine State looking for insurance.
“Lexington’s decision to discontinue their program is another reminder of the difficult market conditions we are facing today. Rachel Salter, Burns & Wilcox, regional practice leader, Bay Area, said:
A variety of insurers have dramatically reduced their capacity or completely left the Florida property insurance market in recent years. Insurance companies in Florida have been affected by cat losses and roof claims (mostly due to hurricanes), as well as rising litigation costs.
According to the National Association of Insurance Commissioners (NAIC), Florida accounts for 76% of lawsuits in the United States, although only 8% of lawsuits. In particular, plaintiffs’ lawyers have targeted loopholes in the legislature around loopholes and benefit allocations, helping landlords make first-party requests.
Left to fight or settle a large number of lawsuits, property insurance companies in Florida have seen their litigation costs skyrocket. This has led to what many call the “property insurance crisis,” in which insurers are not renewing policies or some have stopped writing new policies about homeowners in the state.
At the end of April, there were more than 875,000 insurance policies in effect with the last state-backed insurance company, Citizen Property Insurance Company. However, Citizens only insured properties of up to $700,000 in much of the Sunshine State, leaving high returns — valuable homeowners — many of whom used Lexington — in a tight tie.
In May, AM Best released a commentary titled ‘Florida real estate market participants struggle under tremendous pressure’, explaining how florida insurers’ ability to buy reinsurance insurance is shrinking. As a result, property insurers have had to refine their risk accumulations and target non-renewals to minimize their need for reinsurance — leaving some residents uninsured or uninsured.
To address these challenges, the Florida legislature recently gathered for a special session on property insurance, and two bills were passed into law. The first fund (CS/SB 2-D) created a $2 billion reinsurance fund to help insurers with risk portfolios, and the second fund (SB 4-D) focused on building safety, with the entire section on the roof system. The legislature has also closed problematic loopholes around vulnerabilities and the allocation of benefits.
While many insurers have changed their risk appetites in the state, Salter said Burns & Wilcox “will continue to offer the same innovative market solutions and professional underwritings that are always on the table” in Florida and in other challenging and difficult property insurance states.
She added: “Our recent London Market meetings have ended on positive note, where we maintain high levels of aggregate and even more capacity in areas that are difficult to book in places like Florida.” “In addition to the London market, we have expanded our capabilities from our domestic partners, and even support from sister company Atain, am’s best A-rated company.
“Our service providers have the highest level of trust in managing our programs, and internally, the practice team has developed processes with regular test scores to ensure that programs remain profitable. This may not be the same story or message you’re hearing from other brokers that lose access to Lexington as a program. We will be happy to assist our partner agents with Lexington’s clients as well as other new business opportunities. ”