Will Consolidation Save Florida’s Insurance Market After Record…


Hurricane Ian, the Category 4 storm that recently swept through Cuba, Florida and the Carolinas, is proving to be the most destructive in Florida history. With 105 of the 113 confirmed death having taken place in the Sunshine State, Ian is the deadliest storm to hit Florida in nearly 100 years. It is also shaping up to be one of the most devastating hurricanes in US history, with estimates putting the total economy damage to more than 100 billion dollars in the southeast of the country.

In addition to this immediate destruction of life and property, there is also the long-term damage to farmland essential to America’s food supply. Florida is a key food source for the United States, producing everything from vegetables and livestock to dairy, fruit and honey. Ian’s devastation of huge tracts of farmland and his Hourly during the planting season will make its catastrophic effects felt long after it has passed.

There could hardly have been a worse time for such a blow to food production. Around the world, the price of even the most basic commodities is skyrocketing, fueled by widespread droughts, war in Europe and global financial chaos. In some cases, like Florida’s notorious orange growing industry, Ian’s effects will be added to an existing list of problems. Before the storm, Florida was already delivering its the smallest harvesting oranges since World War II due to the ravages of “citrus greening,” a bacterial infection that sends shivers down the spine of the 76,000 Floridians whose jobs depend on growing oranges.

In recent years, such examples of collapsing production have gone from rare exceptions to the norm, leading some to question the long-term viability of food production in Florida.

The woes of insurance

Americans may be wired against such pessimism, but foreigners observers argued that the storm could well spell the end of Florida as an attractive destination for living and investing. The frequency with which catastrophic natural events affect the state has soured its housing market, once so attractive to millions of retired Americans, and made property insurance a headache. Expecting more claims than in other parts of the country, insurers have raised both the prices and the requirements of their policies, making insurance in Florida difficult to obtain and expensive to maintain.

Last year alone, insurers had to pay almost a billion dollars in claims against Floridians, which was more than the previous two years combined. Those sums will be completely eclipsed this year, with the industry looking at a $63 billion bill, a staggering an amount that is sure to drive some businesses out of business. In fact, Ian will only accelerate a trend already underway: since the beginning of 2020, a dozen Florida insurers have closed shop, with half of those defaults coming in 2022.

Consoli marketdonation

While Florida’s insurance industry woes are likely to continue, too gloomy forecasts may prove premature. Yes, insurers are struggling to adapt quickly to a new risk environment dominated by the effects of climate change. Increasingly frequent and severe extreme weather events, crop-devastating droughts and wildfires, and a generally more hostile environment are quickly becoming a reality that many insurance companies are simply not equipped for.

However, the insurance industry is unlikely to fail completely. After all, people need insurance now more than ever to navigate this new normal. It is more likely that the insurance market will readapt to new conditions through a wave of consolidations. This will create a market in which a smaller number of larger players will be better equipped to meet the needs of their customers, as well as withstand shocks such as Hurricane Ian.

This consolidation trend is already visible around the world, where a number of high-profile insurance mergers and acquisitions in recent years suggest that such a wave of consolidation is well underway. French mutual insurance giant Covéa, for example, acquired reinsurance firm PartnerRe over the summer at a price close to the €8 billion mark. Discuss the acquisitionCovéa CEO Thierry Derez specifically cited the new challenges posed by climate change as the reason for the move, with industry commentators pointing to the merger as Covéa’s way to ensure its sustainability. stability in a sector shaken by insecurity and volatility. And given the historic and financially devastating hailstorms and droughts that hit its home market, France, last summer, Covéa’s acquisition of PartnerRe underscores how mutual players need to work together at scale. to deliver the secure and comprehensive coverage customers need in this challenging new reality. .

The Italian insurer Generali is also looking to move, announcing a month ago it is currently in talks with US investment firm Guggenheim, hoping to acquire its asset management business. In India, the life insurance business experienced a significant merger between Exide Life Insurance and HDFC Life which should significantly expand the portfolio of the new conglomerate at a time when experts see no signs of the consolidation trend slowing down.

Sink or swim

The 21st century has brought huge changes to the insurance industry. The effects of climate change are no longer a threat to the future, but a constant danger of the present, as proved this year by Hurricane Ian on one side of the Atlantic and the hottest summer in the European history on the other. An insurance industry that still operates by old-world rules needs a serious overhaul.

For Florida, there is therefore still hope: the home insurance market was a disorder before Ian because many smaller players were unprepared for the intensity and frequency of modern natural disasters. However, this disaster could be the trigger for a profound evolution and transformation of the entire sector. The world has changed, the insurance industry must change with it.



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