A major market for Bermuda’s reinsurers, Florida, is in danger of becoming largely uninsured if legislators there do not make the right decisions, according to one top-level British insurer.

Patrick Tiernan, Lloyd’s chief of markets, this week told The Royal Gazette: “Given that there is such a crunch on capacity, there is not enough capacity to go around at this year end, so different states and jurisdictions are going to have to work harder to attract capital.”

Mr Tiernan was on the island this week for the Association of Bermuda Insurers and Reinsurers annual general meeting.

In April, The Royal Gazette reported that Bermuda reinsurers were monitoring ballooning property insurance rates in Florida, downgrades to the state’s property insurers precipitated in part by insurance fraud and expensive litigation.

Florida homeowners were already facing annual insurance premium increases of more than 20 per cent, when Hurricane Ian developed in September. It became one of the most expensive storms to hit the Sunshine State, with one estimate of economic costs exceeding $100 billion.

Mr Tiernan said Florida’s issues were well known.

“There is a critical session of the Florida legislation coming up in the next two weeks, looking to start addressing some of these issues,” he said. “I don’t think the insurance capacity needs elements of certainty and it needs good balance between the competing interests in a market. That is the correction that is needed in certain states and this is a good time to do it.”

He said, in a more general sense, the problems were not just caused by legal problems or climate change.

“What neither of those arguments take into account is the demographic effect that is going on,” he said. “Sixty per cent more people are living by the coast, and 25 per cent more people are living in flood and fire zones. The exposure is going well up. Couple that with a bit of inflation and we have to start acting, otherwise, if we do nothing, we go down a pretty bad road.”

Mr Tiernan said as the industry looked towards January 1 property renewals, the capacity challenge was massive.

He said Lloyd’s had “sensibly” shrunk the amount of cat that is written in the market over the last couple of years, but we had probably seen an overcorrection in the market when it came to improvement in insurance.

The war in the Ukraine is a major concern for Mr Tiernan, and so is the worsening relationship between China and the United States.

“The sanctions there would be multiple times what we have seen in Russia and Ukraine,” he said. “As we look forward, a little bit longer, we need to insure that the products and services we are selling are relatable and affordable to those who need to buy them.”

He said the hardening insurance market presented a great opportunity to rebuild the Lloyd’s market as a go-to market for reinsurance.

“We would like our market to grow sensibly over the next few years,” he said. “From reinsurance that is a big opportunity. I think the opportunity is to be on the front foot and be innovative again, because we do feel that Lloyd’s is the home of innovation. Now is the time. We have to do things a bit more differently. We have to let the market be innovative and take risks and find new solutions.”

In an article in yesterday’s Royal Gazette, one London insurance-tech executive suggested that the Bermuda and London insurance markets were resistant to digitisation of insurance processes such as insurance placing, preferring face-to-face interaction.

Mr Tiernan did not see the face-to-face market ever disappearing.

“Once you get into reinsurance, and complex risk structuring, it is a face -to-face market because of the complexity,” he said. “A lot of it is solutions, rather than just widgets. Where the market can be digitised, you see quite a lot of examples of digitisation. You see an awful lot of auto writing and quoting in the SME market. So it is not as if the property and casualty market can’t do it, or won’t do it. They do it where it makes sense.”

But he believed there was “a little bit too much” inefficiency in placing in general in the London insurance market.

Mr Tiernan said that while he was in Bermuda this week he hoped to build bridges between Bermuda and Lloyd’s, especially given the massive challenges the insurance and reinsurance market faced over the next few years.