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Ricardo A. Espino
President & CEO

Letter from our President

Industry Challenges Bring Opportunities

AOB, catastrophe costs & rising reinsurance rates create challenging times

Cause and effect — our industry is built upon an understanding of the principle.  As we survey the current property and casualty landscape, we can see the ripple effect in action as causes lead to consequences, some anticipated and some not.

In Florida, Assignment of Benefits (AOB) reform proposals failed to be heard before the legislature for a sixth straight year.  With an AOB, third parties such as water mitigation companies and roofers may directly pursue (and sue) insurers for payment of amounts that are often greatly exaggerated—with the additional incentive of seeking significant plaintiff attorney fees from the insurer.  According to the Florida Office of Insurance Regulation, water claims with an AOB have an average severity nearly 85% greater than claims without an AOB.  Of course, in the end, the real detrimental impact is on consumers as the increased severity results in increased rates. 


This effect is magnified when intertwined with a major catastrophic event such as last year’s Hurricane Irma.  Also, as we know all too well, hurricanes are not the only cause of rising catastrophe costs.  According to catastrophe risk modeling firm Karen Clark & Company, the annual expected insured losses for severe convective storm (SCS) risk are now almost $25 billion a year, more than those of hurricane and earthquake combined.  We see this risk made manifest in our book of business with frequent wind and hail events striking the Gulf states.

As we begin to digest all that transpired in our industry during 2017, I leave you with some
mind-boggling figures:

  • Worldwide, more than 11,000 people lost their lives to natural and manmade catastrophes (1)

  • Insured losses from catastrophe events totaled an estimated $144B, highest ever (1)

  • North Atlantic hurricane season was costliest since 2005 with Hurricane Harvey, Irma and Maria (HIM) (1)

  • U.S. well above average tornado and Severe Convective Storms (SCS) produced more than $19B in losses (1)

  • Six SCS events greater than $1B in losses during 2017, largest impacting Denver, Colorado at $2.5B (1)

  • Interestingly, 604 hail events with size greater than 2” reported in 2017 in contrast to 785 in 2016 (2)

(1) Source: Swiss Re Sigma 1/2018        (2) Source: AON Benfield


We and our industry peers have felt the impact of these drivers—directly and indirectly.  Both direct losses, and rising reinsurance costs due to industry losses, create upward pressure on primary rates.  But as always, with challenge comes opportunity.  New technologies and approaches to the agency-carrier-customer point of sale abound, with the digital revolution presenting the ability to enhance ease of use and rating accuracy simultaneously.  Rather than retreat from these changes, we will embrace them—they will allow those who innovate to thread the needle in balancing growth and profitability aims.  We are confident that when coupled with our pricing discipline and sophisticated approach to risk management, our continuing evolution will ensure our place as the carrier of choice for our agency partners in these challenging times.

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