editorial

By any measure, Poe Financial Group was a success story when it came to Florida's homeowners' market. Unlike other take-out companies, Poe promised to be here for the long haul. Poe took this commitment seriously as it placed three insurers under its umbrella, which, combined, became the second largest private carrier in South Florida. That, however, was before eight hurricanes and four tropical storms decided to leisurely make their way across the state within 15 months.

As a result, the company has had to pay out some $2 billion in hurricane damage due to the 2004 and 2005 hurricanes, an estimate that is expected to grow as the 2005 claims continue to develop. Add to that fact a myriad of complaints from consumers whose homes have yet to be repaired and the fact that the 2006 hurricane season is just weeks away, the company faced two options. Shed its exposure as quickly as possible, or close its doors and let the chips fall where they may.

Faced with two unpalatable options, Poe announced it has decided to non-renew 186,000 homeowners' and condominium policies that are covered through Atlantic Preferred and Southern Family. Poe has also announced that its third insurer, Florida Preferred — which has 145,000 policies in force — will no longer write new business. Whether this will save the parent company remains to be seen. But the fact is that Poe is not a fly-by-night company staffed with incompetent management. The company just fell victim to nature and, therefore, represents an abject lesson. Namely, even with the best of intentions, trying to make it in Florida's high-risk homeowners' market is a dicey proposition.

While Poe takes the financial and regulatory hit, Floridians are the ones who will likely pick up any future bills. With the homeowners' market all but locked down with the approaching hurricane season, the vast majority of Poe's former policyholders are headed for Citizens Property Insurance Corporation. The residual market, however, is facing its own problems, including a $1.7 billion deficit, which lawmakers are trying to find a band-aid to cover in the form of sales tax revenue. Also, the policyholders will likely pay higher rates for lower coverage.

From one perspective, the specter of Poe's financial woes raises the point that if they can't make it in the market, who can? It also touches on a deeper issue, and that is how the Florida market is perceived. The old adage about the changes in the stock market is that the fluctuation in prices is based on 10 percent knowledge and 80 percent emotion holds true in Florida, as well. In the immediate aftermath in Florida, many experts said that hurricane risks are uninsurable.

After a couple of years without hurricanes, however, the market returned and people started questioning whether companies were becoming complacent. Now, after the 2004 and 2005 season, there is no reason to worry about complacency, but there is plenty reason to worry over capacity.

That is why the 2006 hurricane season is so important, for it could tip the scales one way or another. Either lawmakers must pass a comprehensive property bill and the state is lucky enough to be spared any more hurricane damage, or it will face another season like 2005 and 2006. If so, all bets are off.