Florida’s homeowners market may look better than it has in the past, but Travelers Cos. is still steering clear, according to Travelers Personal Insurance President Michael Klein.
It’s still a highly catastrophe-exposed geography and carriers are vulnerable to an assigned risk obligation if a significant catastrophe strikes, he explained during a first-quarter earnings conference call.
“While we do see signs of improvement … it’s going to take more. We haven’t seen enough change to cause us to change our perspective on wanting to reopen to business,” said Klein. “It is still a place where we think the risk reward is not in balance.”
Chairman and Chief Executive Officer Alan Schnitzer said enacted tort reforms were an “excellent start” in Florida. “We would love other states to follow suit,” he said, but agreed other “structural” elements are an impediment.
The company routinely evaluates conditions, both men said.
Travelers Cos. Inc.’s first-quarter net income increased 15% to $1.12 billion despite higher catastrophe losses, largely on elevated activity in Central and Eastern states, Schnitzer said.
Renewal premium change was 16.6% in personal automobile and 13.4% in homeowners and other business, he said. That was basically flat, compared with the fourth quarter for auto, but down from 21.2% in homeowners in the prior quarter.
Because Travelers writes mostly 12-month auto policies, Klein pointed out a rate hike enacted in May 2023 is still taking effect on policies renewing this month. Personal auto renewal premiums change should moderate as the year progresses, he said.
However, in homeowners the carrier plans to keep raising rates “in response to increased loss costs.” Renewals declined because Travelers took “dramatic increases in property Coverage A limits” in 2022 and 2023 and has caught up with higher values and construction costs.
“What you’re looking at now is mostly our outlook for rate” increases for homeowners, said Klein.
In terms of non-rate actions, he said the carrier, like others in the industry, is executing broad changes. First, it determines eligibility after evaluating exposure and roof age, he said, and may place underwriting restrictions based on roof conditions or tree overhang.
“Our primary approach on risk sharing is really to focus on all other perils and wind-hail-tornado deductibles,” said Klein. Travelers has implemented higher tornado and wind-hail deductibles in 21 states, “virtually every severe convective storm-exposed state across the country.”
“We’ve increased deductibles to help deal with the exposure, and then managing distribution” and appetite to address aggregated exposure locally and at the state level, Klein said.
Travelers completed its $435 million acquisition of cyber insurance managing general underwriter Corvus Insurance Holdings Inc. at the start of the year (BestWire, Jan 3, 2024).
Bond and Specialty President Jeff Klenk said the company feels “really good about bringing in and leveraging the capabilities of both organizations. We feel really good about the quality, the profitability of the Corvus book of business. It’s consistent and we’re taking some of those capabilities.”
Travelers has scanned its business using proprietary technology acquired with Corvus. “We’re really comfortable with what we’re seeing,” said Klenk.
Most operating entities of Travelers Cos. Inc. currently have a Best’s Financial Strength Rating of A++ (Superior).