Florida has effectively forestalled any immediate exodus by carriers from the homeowners' insurance market in the wake of the recent tornado catastrophe, but one risk management consultant said the upshot of moves by government officials is to discourage insurer involvement in the Sunshine State.
Florida's cabinet passed an emergency regulation that prohibits insurers from nonrenewing policies until they make a new rate filing that includes expected savings on reinsurance costs.
Florida's new property insurance law, passed in January, includes a provision to allow primary insurers to buy additional reinsurance from the state catastrophe fund at cheaper prices than they would see from a private reinsurer. Primary carriers would be expected to lower rates as a result.
Robert Lotane, a representative for the Florida Office of Insurance Regulation, said his agency is trying to figure out how much rates should be reduced for every territory in the state, with a schedule to be published by March 15. "It would be a percentage saying X-type of company in Y-territory should be able to reduce their rates" by a certain amount, he explained.
He said the cabinet's emergency rule was promulgated because Republican Gov. Charlie Crist feared companies might undertake mass nonrenewals or sharply raise rates in the interim.
He said The Hartford, prior to enactment of the emergency rule, had notified the state that starting this summer they will be nonrenewing 38,000 policies, but that customers would be able to renew for one more year and in some cases nearly two years.
The Hartford said it would be ending its relationship with agents selling personal lines in Florida, but will continue selling commercial insurance. The process of discontinuing personal lines business with agents could begin in August, but the carrier said agents can renew existing customers through Aug. 2, 2008, giving them 18-to-30 months to secure coverage elsewhere. The Hartford called Florida "one of the most challenging markets for insurance companies to do business."
David Siesko, a principal with Siesko partners, a risk management consulting firm, said the state's recent regulatory actions give insurers "no incentive to stay there."
After 2006–the industry's most profitable year in the last 50–insurers will be looking to invest in locations where they could try out new products, not "where there has been state intervention on the type of risks that you write."
However, Mr. Lotane noted that while The Hartford is leaving, a new company–American Integrity–had recently been licensed to do business in Florida, and would be taking on 100,000 homeowners' policies from Citizens Property Insurance Corp., the state's insurer of last resort.
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