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Risk of Material Adverse Deviation…in a “Say” Property Insurance Market Such as Florida

By on January 11, 2022 0

Columbus, Ohio, January 11, 2022 /PRNewswire/ — Since 2001, the statement of actuarial opinion regarding the net loss and loss adjustment expense reserves on a property and casualty insurer’s balance sheet as well as the gross loss and LAE reserves prior to the application of reinsurance required the actuary’s view of the risk of material adverse deviation (RMAD). Essentially, the question is whether the ultimate loss and LAE reserves will differ from the carried forward loss and LAE reserves by the dollar amount selected by the actuary as “material”.

Accredited professionals review the market in which an insurer operates, establish a standard of materiality, outline the rationale for the standard and, when analyzing the insurer’s operating environment, summarize the risk of adverse deviation significant of the loss carried forward and LAE reserves compared to the ultimate loss and LAE reserves. Historically, a variety of rationales have led professionals to one of two conclusions: yes, there is RMAD, or no, there is no RMAD.

For carriers focused on florida residential property insurance market, a market described as a “catastrophe” by one of the professionals responsible for regulating the market, the question at the end of 2021 will be “a risk of material adverse deviation is there likely? If so, why? If not, why not?

To help others understand the homeowners insurance market in Floridato December 14, 2021, Joe PetrelliDemotech, Wes Todd, SquireCaseGlide, Lisa Miller, Lisa Miller & Associates, and Guy FrackerCrea8tefutures Advisory and Consultancy discussed excerpts from public statements made by David Altmaier, Barry Gilway, Simon Whiteand Tasha Carter. They also shared their views on the operating environment of florida home insurance market.

Petrelli noted that a tactile review of public information related to statements of actuarial opinion regarding carriers operating in virtually identical markets in Florida revealed that some actuaries had raised concerns about the RMAD and others had not.

Todd noted that it might be beneficial for an actuarial review of loss reserves to have a stratification and delineation of losses by type of loss, cause of loss, and perhaps even adjuster and plaintiffs’ attorney. This information is readily available to actuaries who rule on CaseGlide client loss reserves.

Miller noted that public testimony from Altmaier, Gilway, Blank and Carter seemed to indicate that insurers’ operating results were focused on residential property insurance in Florida has been unstable and difficult for many years.

According to Fraker, “by almost any traditional definition, or metric, florida the residential property and casualty insurance market no longer exists, having been replaced by a manufactured litigation market. Consequently, more than $4.5 billion annually is redistributed away from Florida residents, Florida insurers, insurance investors and florida economy.”

Others focused on florida The home insurance market may want to review the webinar recording. Registration is available at https://youtu.be/7GDp1PdWepw.

About Demotech, Inc.

Demotech, Inc. was the first firm to rate independent, regional and specialty insurers. Since 1985, Demotech has served the industry by providing accurate, reliable and proven financial stability ratings to P&C insurers and security underwriters. FSRs provide an objective benchmark of an insurer’s solvency. Demotech’s philosophy is to review and evaluate insurers based on their area of ​​focus and business model execution rather than solely on financial size. Demotech’s growing accreditations and acceptances have resulted in its review of over 450 insurers operating in the United States. To visit www.demotech.com for more information.

On florida Residential insurance market

florida P&C Insurance Market: Spiraling Towards Collapse”, was written by Guy Fracker, Cre8tfutures innovation and consulting system. He was of the opinion that florida The property insurance market is ‘spiraling into collapse’ and needs immediate attention if there is any chance of protecting the market, consumers and ultimately the state’s economy . Report identifies state’s ‘litigation economy’ as major contributor to insurance market woes, as opposed to numerous weather events Florida endured.

SOURCE Demotech, Inc.