Reinsurance and retrocession capacity for Florida surged at the June–July 2025 renewals, supported by strong investor appetite in the insurance-linked securities (ILS) space and growing confidence in the state’s reformed legal environment, according to Fitch Ratings.In a recent report released by Fitch Ratings, analysts noted that the rise in capacity, both from traditional reinsurers and non-traditional sources including record-setting catastrophe bond issuance, comes amid sustained demand from Florida property insurers following a highly active 2024 hurricane season.Notably, both hurricanes Milton and Helene made landfall in Florida within a two-week span during last year’s very active season, adding urgency to midyear placements.Fitch reports that while reinsurers had hoped for a hardening market in light of significant catastrophe losses so far in 2025, notably California wildfires, rates softened modestly, particularly for loss-free business, which saw reductions of 10% or more.

Pricing for loss-impacted business was flat to slightly up.However, terms and conditions largely held firm, with retentions steady at levels that protect capital rather than earnings.“Reinsurance and retrocession capacity to the Florida market are increasing from both traditional and ILS sources, including record issuances of catastrophe bonds.

This increased supply reflects catastrophe risk returns that remain strong, although somewhat reduced from the market reset in pricing and terms and conditions experienced in 2023, post-Hurricane Ian,” Fitch said.that catastrophe bond issuance reached a record-breaking $5.9 billion in May alone, helping drive total issuance past $15 billion for the year so far, a 15% increase year-on-year and the strongest performance on record.Meanwhile, Fitch also pointed out that capacity is primarily being deployed at higher catastrophe layers, as reinsurers remain cautious of providing coverage at lower layers, where elevated property losses persist.

“Fitch expects the reinsurance market to maintain its discipline and continue to support strong risk-adjusted returns as catastrophe risk remains high amid climate change concerns.” Beyond hurricane activity, Fitch attributed the surge in demand to structural shifts in the Florida insurance market.The Florida Hurricane Catastrophe Fund (FHCF) raised its retention by $2 billion to $11.3 billion.Additionally, several new insurer entrants and increased policy take-outs from Citizens Property Insurance Corporation, which typically relies less on private reinsurance, have boosted demand.

Takeout companies, in contrast, tend to purchase more private protection.While the capital strength of some Florida-focused insurers remains weaker than that of national peers, the broader industry capital base remains sufficient to absorb significant hurricane losses in 2025.However, Fitch cautioned that individual Florida specialists could face challenges if the region sees another severe catastrophe season.

Furthermore, Fitch also acknowledged the stabilising effect of litigation reforms introduced in Florida since 2019.These include the removal of one-way attorney fees, restrictions on assignment of benefits, and limitations on bad faith claims.While the reforms have not yet triggered a major return of capacity from highly rated global insurers, Fitch notes that initial signs suggest a positive impact on loss costs and litigation activity.

It’s also worth noting that the renewed interest from ILS investors, and the record catastrophe bond issuance, has been driven by several interlinked factors.These include attractive pricing and solid returns, even if slightly below the peak levels seen in 2023; stronger terms and higher attachment points following the 2023 market reset, which have made cat bonds and collateralized reinsurance more appealing to investors seeking protection from frequent small losses; and, as previously mentioned, a reformed legal and regulatory environment in Florida that has significantly improved market confidence.Meanwhile, following improved profitability and more favourable operating conditions.

While, .Overall, the mid-year renewal period reflected a more balanced market environment.Improved legal frameworks, solid industry capital, and favourable ILS market conditions are supporting a more stable, though still selective, return of reinsurance and retro capacity in Florida.

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