The pace of rate reductions accelerated at this year’s 1 June Florida reinsurance renewals as excess capacity and strong competition placed downward pressure on pricing, according to JLT Re.

The reinsurance broker reported that its risk-adjusted Florida property catastrophe rate-on-line (ROL) index fell by 5.1 percent at 1 June, representing the sixth consecutive year of price decreases. This was deeper than the 3.1 percent cut reported last year.

It said that renewal rates ranged from flat to down 10 percent, with the broker highlighting that pricing for Florida business was now around 40 percent below 2012 levels and only 10 percent above the previous cyclical low of 1999/2000. In its report, JLT Re noted a “renewed vigour” from insurance-linked securities (ILS) markets to deploy capital this year as they looked to increase participations, particularly with stronger-performing cedants.

The broker said that claims from Hurricane Matthew had little bearing on renewals, even for cedants whose lower layers were impacted.

Commenting on the renewals, JLT Re North America Executive Vice President Bob Betz said the outcome of the 1 June renewals had been varied and was very much determined by cedant size and performance.

“After a difficult 18 months for the Florida insurance market, where attritional losses and mounting litigation related to assignment of benefits (AOB) claims contributed to approximately 40 percent of state insurers suffering underwriting losses in the first quarter of this year, smaller companies with capital surplus of less than $25mn in particular have come under increased rating agency pressure,” he noted.

“At a time when markets are focusing on performance, these carriers generally saw less favourable outcomes in both price and reduced line size,” he continued.

Meanwhile, JLT Re said that retro providers had also suffered from price decreases as risk-adjusted rates were down in the mid-single digits, with the broker citing an abundance of capacity and a benign loss environment. Demand remained strong as buyers took advantage of a soft market, with the broker stating that market conditions were now at their most competitive than at any time since the late 1990s and early 2000s. As a result, it said that many reinsurers lowered retentions and added additional layers of coverage at the 1 June renewals, including more per-occurrence covers. Others became more specific in their purchases, moving from worldwide to Florida only covers. David Flandro, JLT Re’s global head of analytics, said that surplus capacity was continuing to drive softening reinsurance market conditions, despite shrinking reinsurer returns in the year-to-date.

The reinsurance broker estimated that dedicated reinsurance sector capital stood at $325bn at end of the first quarter of 2017, up 1.2 percent from the end of last year. This is against 2016 premiums of $255bn.