According to the 2011 annual report on medical-malpractice riskfrom the Florida Office ofInsurance Regulation (OIR), medical-malpractice insurers sawtheir seventh consecutive year of profitability in 2010.

The study shows that the average countrywide return on surplusfor Florida's leading medical-malpractice writers was 12.2 percentin 2010, up from of 6.6 percent in 2009.

In an attempt to put those percentages in perspective, OIR notesthat the return on surplus is a national number that takes intoaccount profitability in states other than Florida, and it also maybe affected by changes in loss reserve adequacy. The 12.2 percentfor 2010 also includes the profitability of other lines ofinsurance for multi-line writers. When the return on surplus iscalculated only for those leading companies writingmedical-malpractice in Florida, the return was 9.5 percent.

Florida's medical-malpractice market has enjoyed relativestability since lawmakers enacted reform legislation (SB 2-D)in 2003 that included caps on non-economic damages and changes tobad faith allegation requirements. The law also prohibited anymedical-malpractice insurance rate changes from July 1, 2003 toJan. 1, 2004, and required insurers to file new rates within 60days of the OIR's publication of the “presumed factor” reflectingthe anticipated savings of the reforms.

OIR notes in its 2011 annual report that “ … it would appearthat the 2003 changes to the law have benefited policyholders andthe industry, assisted with the solvency of medical malpracticecarriers, and directly contributed to lowering the defense cost andcontainment ratios in Florida.”

By statute, the OIR must use three specific data resources indeveloping its annual report: The National Association of InsuranceCommissioners (NAIC) annual financial statement filings; the closedclaims database maintained by the OIR; and an analysis of ratefilings filed with the OIR during the previous year.

Using those resources to gather information about the 23 firmscomprising 80 percent of the Florida market, the study foundthat:

• Although many (if not a majority) of companies specialize inmedical malpractice insurance, this is usually not the onlyline of business written by the insurers.
• Florida is usually one of their top five premium markets.
• Their loss and expense ratios in Florida, while varied acrosscompanies, are often among the lower loss ratios for each ofthe company's top five premium states.
• The premium weighted effective average return on surplus was12.2 percent in 2010, up from 6.6 percent in 2009, also up from 9.5percent in 2008 and 11.0 percent in 2007.
• Solvency risk does not appear to be a critical issue with thesesample companies. The companies have shown favorable reservedevelopment for the fifth year in a row, reversing a previous trendof adverse reserve development.

The OIR reports that in 2010 it processed 61 medical-malpracticerate filings that generated rate changes or a validation of rates.On average, physicians and surgeons rates for companies writing inthe admitted market decreased approximately 2.3 percent. Increaseswere seen in other specialties: Dentists' rates increased 4.0percent; professional nurses' rates climbed 11.4 percent; and ratesfor podiatrists, optometrists, chiropractors and similarprofessionals rose 2.3 percent.

The data on closed claims shows:

• 2,520 claims were reported as closed during 2010 (down from3,087 in 2009); 1,252 claims were closed for females, 1,268for males.
• Hospital inpatient facilities were the most commonly reportedclaims location.
• Most claims were in the “severe to moderate” category.
• An estimated $766.6 million (4 percent above 2009) was paidover the lifetime of the claims closed in 2010; $594.4 million waspaid in damages, the remainder in loss adjustment expenses.

The report also contains information and charts comparingFlorida with other states in the top ten for most medicalmalpractice premium earned in the admitted market: New York,California, Pennsylvania, Illinois, New Jersey, Ohio, Texas,Massachusetts and Georgia.

Additional data compares Florida with other states in the topten for most medical malpractice direct losses incurred: New York,Pennsylvania, New Jersey, California, Illinois, Massachusetts,Maryland, Georgia and Washington.

When Florida is compared to other large states, it is the fifthlargest market as measured by direct premium written. It rankseighth among the ten most populous states when measured by lossesincurred to earned premium ratio (25.3 percent).