PRICING
• While average quotes at the June 1, 2010 renewal dropped by 5 percent to 7 percent from 2009 quotes, quotes were almost flat when compared to 2009 firm order terms – surprising, given the general expectation of decreasing pricing.
• 2010 firm order terms averaged a decrease of 5 percent to 7 percent in the lower layers,where capacity was less abundant, and 13 percent to 15 percent in the upper layers.
• Overall, pricing has shifted closely back to levels prevalent in 2008. Despite the global
economic turmoil of 2009, pricing has remained within a consistent, narrow band since 2007.
RENEWAL CHALLENGES
• The structure of the Florida Hurricane Catastrophe Fund (FHCF) remains a critical factor for Florida contracts renewing at June 1, 2010 renewals.
• Questions persist regarding the viability of the TICL layer and rating agencies’ treatment
of it within the reinsurance structure. Of the USD10 billion offered in 2009, only USD5.56
billion was taken up. This year, the TICL layer was further reduced to USD8 billion, with
a take-up of USD2.72 billion expected.
• Both the Florida Office of Insurance Regulation (OIR) and Demotech contributed commentary on appropriate risk transfer approaches, which had an impact on some companies’ purchasing decisions.
• Economic issues continued to weigh heavily on Florida insurers. It will take time before
the effects of any approved rate increases and other corrective actions can substantially
impact the erosion of capital.
Lara Mowery, Global Head of Property Specialty, Guy Carpenter & Company, said, "Florida always presents a set of unique challenges for companies designing and placing their reinsurance programs, and this year was no exception. However, the continued downward trend in pricing that resulted from a return of capital to the marketplace, balancing the scarcity of capital we witnessed last year, is certainly viewed as a positive development.”