Fla. homeowners insurers see large unfavorable reserve development through Q3'21

Homeowners insurers focused on the Florida market saw a surge in unfavorable prior-year reserve development in the first three quarters of 2021.

Adverse development a recurring theme

Florida specialty homeowners insurers recorded a collective unfavorable prior-year loss development of $217.2 million during the first nine months of 2021, according to an S&P Global Market Intelligence analysis of statutory filings. That marked the fourth-consecutive year that the 52 companies as identified by Citizens Property Insurance Corp. experienced adverse loss development in the first three quarters of a year. The total nine-month adverse development from those companies was $49.3 million, $71.1 million and $81.0 million in 2018, 2019 and 2020, respectively.

If fourth-quarter development surpasses $9.3 million, the full year loss development for 2021 will exceed that of the recent high of $226.5 million in 2019.

Due to quarterly reporting limitations, reserve development shown is inclusive of all business lines and not specific to homeowners coverage. However, the companies included in this analysis primarily write homeowners business; their total results generally reflect homeowners performance.

Double-digit reserve strengthening for 10 insurers

Through the first nine months of 2021, The Progressive Corp.'s American Strategic Insurance Corp. recorded the largest unfavorable one-year reserve development at $31.2 million, which is 8.5% of the total prior-year net unpaid loss and loss adjustment expense.

Florida Farm Bureau Casualty Insurance Co. second-largest reserve strengthening in the period. Its $26.4 million increase in reserves is mainly the result of adjustments made within the homeowners and automobile lines of business, according to a regulatory filing.

Universal Property & Casualty Insurance Co., the largest homeowners writer in Florida based on direct premiums written in 2020, boosted is prior-year reserves by $18.0 million as of Sept. 30, 2021. Losses originating from hurricanes Matthew, Irma, Michael and Sally were responsible for $4 million of that total. The remaining $14 million stemmed from settlements on litigated claims occurring in accident year 2019 and earlier.

Universal's parent company, Universal Insurance Holdings Inc., announced after-tax adverse development on prior-year reserves of almost $28 million during the fourth quarter of 2021

Of the insurers with more than $10 million in adverse development in the period, three insurers strengthened reserves by at least 40% of their total prior-year net unpaid loss and loss adjustment expense. Avatar Property & Casualty Insurance Co. had the largest such percentage increase of 78.6%, followed by First Protective Insurance Co. and St. Johns Insurance Co. Inc. at 48.4% and 41.9%, respectively.

Cypress Property & Casualty Insurance Co. had the largest favorable prior year development of $26.8 during the first nine months of 2021.