Florida Market Still Frustrates Surplus Brokers

It has been quiet on the oceanfront in Florida in terms of hurricanes and tropical storms the past few years. However, the low catastrophe frequency has contributed to an extremely soft and competitive insurance market for Florida excess and surplus companies, according to underwriters and those who specialize in the Florida E&S market.

“In Florida, we have been fortunate to not have any hurricane action since 2006,” says Gary Pullen, executive director of the Florida Surplus Lines Organization (FSLSO). “And as those events don’t occur, carriers forget what it’s like to have those storms and bring capital into the market.”

According to FSLSO, Florida’s premiums have declined continuously over the last three years, although the rate of decline has started to slow. In 2009, premiums dropped 9 percent compared to 14 percent the year before. Through May of this year, premiums are only down 3 percent compared to the same time last year.

The excess capital brought in by admitted insurers has forced many E&S companies to fight for accounts with admitted markets that in a harder market the admitted carriers wouldn’t touch. On the residential side, competition from state-backed Citizens Insurance with its subsidized low prices has made things difficult.

“The admitted markets are seeking to maintain and even grow their market share in Florida,” says Bruce Bowers, president of the Florida Surplus Lines Association (FSLA), as well as senior vice president of Hull & Co. and National Risk Solutions. “We continue to see an intrusion by these markets in what we considered to be our territory and domain. They are lowering rates and writing coverages with more bells and whistles that previously were not offered. It does not appear to be abating at all.”

Challenging for Underwriters

Gary Sanborn, chief executive officer of Crump Insurance’s Altamont Springs, Fla. office, says the current market has been extremely challenging for underwriters.

“From a surplus lines broker point of view, we are in the softest point that we think we can get to, and the economy is kind of a double whammy,” he said. “We haven’t grown in the last two years and have lost business as an organization. Some business was lost partly because of the economy and in Florida the market changed because we haven’t had any hurricanes. This year if we came out flat we would be ecstatic because it would mean the market has leveled off.”

According to Sanborn, many smaller companies that entered Florida to write business in the last three years will be in for a big surprise should a major disaster occur because they have not been pricing adequately.

Although Florida’s surplus lines market is hurting, it is still doing better than others.

“Generally, because of Florida’s catastrophe prone history, premiums for residential and commercial property risks are on the high end of the spectrum when compared to other states, particularly those that are considered non-cat states,” said FSLA’s Bowers.

How Underwriters Maintain Business

Despite the current E&S market challenges, Sanborn says a wholesaler is a real asset to agents and establishing relationships now while the market is soft will benefit retailers when the market turns.

“Retail agents should always have a relationship with a wholesale broker, especially in Florida,” says Sanborn. “We will be swamped with business when the market starts to turn, and we and won’t take on a lot of new agents when that happens. We tend to do business with people we have already been doing business with. It is all about relationships.”

FSLA ‘More Relevant’

To better assist agents, FSLA is strengthening its ties with the local, state and national insurance organizations. The FSLA also recently revamped its website (www.myfsla.com) to make it more functional and informative.

“In essence, we are making the FSLA more relevant, more vibrant for all of our members,” said Bowers. “I want to provide a truly value added benefit for each agent belonging to our association.”

In the meantime, Sanborn says that the industry has to stop focusing on when the market will turn.

“Each month we say to everyone here ‘the market we are in is the market we have to learn to compete in,’ and we need to market ourselves, our carriers and our products as if this is the way the market is forever,” says Sanborn.

Bowers’ counsel is similar. “My advice to our agents is to be patient. The market will harden and this cycle will pass as they always do. Stay disciplined and stay focused. The good times will be here again.”

Topics Florida Agencies Excess Surplus