Insured losses from bridge collapse could reach $4 billion: Morningstar  March 28th 2024

Insured losses from bridge collapse could reach $4 billion: Morningstar

Insured losses arising from the collapse of the Francis Scott Key Bridge after it was struck by a container ship and disruption to the Port of Baltimore could total up to $4 billion, DBRS Morningstar said in a report issued Wednesday.

The loss could add upward pricing pressure to marine insurance rates globally, the rating agency said.

Total insured losses could surpass the 2012 Costa Concordia disaster that resulted in a record marine insurance loss of around $1.5 billion, Morningstar said.

Depending on the length of the blockage of the port and the nature of the business interruption coverage it carries, “insured losses could total between $2 (billion) and $4 billion,” the report said.

Despite the potential for outsized losses Morningstar expects they will remain manageable for the global insurance industry as claims will be ultimately paid by a large and diversified pool of insurers and reinsurers.

N American P/C Insurer Results Improve Despite Personal Lines Challenges

North American property/casualty (P/C) (re)insurer peer GAAP financial results reflect strong performance in commercial lines, offset by continued weakness in auto and homeowners in personal lines, including a heightened frequency of smaller catastrophe events, Fitch Ratings says in a new report.

The sector outlook for U.S. P/C insurance for 2024 is neutral for commercial and personal lines, as issuers broadly have capital strength to support obligations and withstand significant adverse experiences.

Rate increases and rising exposure drove aggregate written premium growth of 11% for 41 GAAP filing (re)insurers peers in 2023. Premium rate increases across sectors reflect a heightened loss-cost environment amid higher inflation for most business lines. The aggregate group combined ratio improved to 94.2% from 96.7% at 2022, driven by a favorable pricing environment.

Investment income rose 33% in 2023 as overall investment yield grew to 4.0% from 3.2% in 2022. Rising investment income should further boost insurers’ operating income reported returns in 2024 as future cash flows are invested at higher yields. Reinsurers, specialty commercial underwriters and Florida homeowners’ specialists generated particularly strong double-digit operating return on common equity (ROCE).

Progressive issues non-renewal notices in Florida

Last year, Progressive announced that it would not renew certain homeowners’ insurance policies in Florida to “rebalance our exposure,” starting in May this year. Those non-renewal notices have already started arriving.

“Dear Policyholder, your policy will expire at 12:01 on July 1, 2024, for the following reasons. After careful consideration we are unable to offer you a renewal policy due to a reduction in our hurricane exposure. Please contact your agent to find replacement coverage,” the letters read.

“I was shocked, I was stunned,” Ira Kasdan told ABC Action News. “There may be a time where as much as we love Florida we may not be able to stay here.”

The news comes as Citizens Insurance, the insurer of last resort for the state that Ron DeSantis has called insolvent, had some good news. It reported approximately 1.162 million policies last Friday, a decrease from 1.18 million policies the previous week and 1.175 million policies two weeks prior, based on the data available on the Citizens website.

Last week, six private insurance companies — Slide Insurance Co., Florida Peninsula Insurance Co., Edison Insurance Co., Southern Oak Insurance Co., American Traditions Insurance Co., and People’s Trust Insurance Co. — received regulatory approval to take over policies from Citizens.

Citizens’ policy count peaked at approximately 1.412 million in the fall of 2023 but has since seen a decrease owing to the depopulation program.

Insurer hit with over 340% surge of lawsuits in Florida federal courts

Hartford Financial Services has been battered by a barrage of lawsuits in the Sunshine State this month, with at least 10 federal district court actions filed during the week of March 11, 2024.

This is roughly four times the typical weekly average.

Among those lawsuits is one filed by Jay Farrow of the Farrow Law Firm in Coral Gables, in which Hartford and 11 additional major insurers face a civil RICO action over claims that the companies have allegedly operated as a cartel by offering back-end profits and commissions to independent brokers who steer customers into policies with higher premiums.

“The implication of this lawsuit is a more fair, honest and transparent insurance system,” Farrow said. “It’s never been done before where Florida statute 895.05(6) is being used to effectuate an injunction to hold an insurer accountable for those types of instruments that profit off both sides. I’m hoping this brings some stability to the insurance craziness.”

Among the defendants in that action besides Hartford are Berkshire Hathaway Specialty Insurance Co., American Casualty Co. of Reading, Pennsylvania, Zurich American Insurance Co., and Chubb Custom Insurance Co. Only Zurich and Chubb responded to a request for comment in which they declined in writing to comment on individual claims.

Now, the civil RICO action is pending before U.S. District Judge Rodney Smith, who sits on the Southern District of Florida bench, in which the plaintiff, Louis Spagnuolo, is seeking at least $30 million in damages.

Homeowners say coverage affordability is becoming more challenging

During 2023, 72% of home insurance policyholders saw premiums grow, according to a ValuePenguin.com survey, which also found that 34% of Americans are finding it more difficult to afford coverage.

Among homeowners surveyed, 34% said they had an increase of 5%-9.9%, while nearly one-quarter saw a 10%-29.99% increase in their home insurance costs. ValuePenguin reported that 3% of homeowners had premium increases of 30% or more. An additional 10% reported being uncertain of how much their premiums rose.

A majority of policyholders believe, and rightly so, that inflation, growing claims volume and labor shortages are among the major drivers of recent rate increases, ValuePenguin reported. Slightly more than half blamed rising home prices and one-quarter pointed to climate change as a cost-propelling force.

Looking into 2024, three-quarters of home policyholders are anticipating another rate increase and 26% are worried their homes will become uninsurable. ValuePenguin noted these fears are not unfounded, as nearly 20% of homeowners said they received a nonrenewal notice. However, 79% of those who received nonrenewal notices were able to secure coverage through negotiations with their current carrier or by switching providers.

Although most home policyholders haven’t moved to change their coverage, their carriers have. Some 37% of homeowners said their insurer changed their existing policy by raising deductibles, adding surcharges or dropping coverage.