June 18th, 2012

Chart: June 1 Florida Renewal Reinsurer Quoting Behavior

Posted at 1:00 AM ET

Analysis of June 1, 2012, leading markets’ quoting behavior reveals a continued shift in the once cohesive view of Florida pricing, reflecting markets’ more precise focus on individual company characteristics and variation in risk measurement as a result of customized use of model output. However, this year’s renewal does not reflect the degree of variation that was evident a year ago when reinsurers had to respond in a very shortened timeframe to conditions impacting their view of risk and capacity deployment tolerance.

In 2009 and 2010, variation from the average quote for Florida renewals was consistently within a range of down 3 percent to up 3 percent from the average. Last year, that volatility increased five-fold for the Florida renewals. In 2012, the range has moderated to down 7 percent to up 6 percent from the average.

In Figure 1, the 2012 average quote across all programs is represented by the line at 0 percent, while the red dots indicate the reinsurers’ distances from the average across all the programs that they quoted. The size of the line represents the variability from the average for all quotes provided by the reinsurer. Each reinsurer is represented across the bottom of the chart by its A.M. Best rating.

Figure 1


While the quoting behavior analysis does not indicate any pricing direction in the market as each reinsurer is measured from the average quote on the program, it does provide support for the idea of a more tailored approach by many reinsurers to each individual renewal. As also noted in the January and April renewal analyses reinsurers are implementing more sophisticated approaches using custom risk measures, based on their own research and experience.

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