States Won't Follow Fla. Insurance Moves, Says Reinsurer

NEW YORK--Florida's legislative remedy to halt escalating homeowners' insurance costs will not be duplicated elsewhere despite its perceived popularity there, an insurance executive predicted.

"There were fears that others would pursue Florida's example, but the other states have stepped back," said Glenn Pomeroy, vice president and head of regulatory affairs for Swiss Re. "It was tempting [for them, but] they do not want to go in that direction at all."

Florida has frozen rates for Citizens, its insurer of last resort, increased the size of its Catastrophe Fund to provide cheap reinsurance to carriers and moved to restrict the use of national insurers' subsidiaries.

A number of sources, including the state's chief financial officer, have called the moves an actuarially unsound gamble.

Speaking last night during an issues briefing given by the Zurich-based reinsurer, Mr. Pomeroy specifically addressed legislation in Louisiana where officials looked at a similar answer but "did not want to take that gamble."

Instead, Louisiana is pursuing more creative answers that include incentive programs to bring private insurers back into the state. He said other states, notably South Carolina, are following the same route in pursuit of public-private initiatives.

"Every state is going to go against Florida's lead," Mr. Pomeroy told National Underwriter, despite the ongoing popularity of Florida's Republican Gov. Charlie Crist, who continues to receive high approval ratings in the state for his actions.

Previously, homeowners could purchase insurance from Citizens at 25 percent above private carriers' rates. That threshold was lowered to 15 percent, allowing more people to enter the program.

The legislature also expanded the Florida Hurricane Catastrophe Fund from $23 billion to $39 billion to make reinsurance for carriers less expensive.

In a speech last week, Florida's Chief Financial Officer Adelaide "Alex" Sink noted that all policyholders would be assessed for losses should Citizens run a deficit, which it did last year when insurers were assessed $163 million. The assessment was passed on as a surcharge to policyholders.

Mr. Pomeroy called Florida's solution temporary and an answer that policyholders may find in the end will "far exceed the savings" they are experiencing today.

If there is one benefit for other states from Florida's action, Mr. Pomeroy said, it would be the reallocation of capacity. With private insurers leaving the state, insurers will reallocate that capacity, helping surrounding states.