LAS VEGAS–The former president of Florida's insurer of last resort told an industry group meeting that a national catastrophe fund would make more sense as a reinsurance program than as a primary insurer similar to the federal flood program.
Speaking yesterday during the National Underwriter Company's 11th annual ACE (America's Claims Event) conference here, Robert L. Ricker, former president of Citizens of Florida, while raising the issue of a national catastrophe insurance plan, maintained he was taking no stance on whether one should be adopted.
He noted that there are major sections of the country with enormous risk exposures from earthquake, hurricane and terrorism. Using a map, he showed that virtually every section of the country is subject to some kind of risk with estimated losses that could run into $10- or $20 billion in losses or higher.
From his own experience as Citizens president from 2003 through two major hurricane years and the expansion of the program, he said it is extremely difficult to begin a primary insurance program that would be similar in nature to the National Flood Insurance Program.
Instead, he pointed out that it would be easier to take a piece of the risk, describing a reinsurance program without using the term, and insure the risk that way.
While discussing the concept, Mr. Ricker said he was not weighing in on the issue because "it is kind of a no winner." He said the question to be answered is, "Do you want to pay up front for the losses with a mandatory program, or do you think it is better to take a portion of it on the back-end?"
The current system, Mr. Ricker said, is damaging the insurance industry's brand with the continued escalation in rates that cannot continue.
After three years on the job, Mr. Ricker resigned his post at Citizens last September after the insurer's operations came under attack from Republican State Attorney General Charlie Crist in the course of Mr. Crist's successful campaign for governor.
Mr. Crist criticized Citizens for hiring outside counsel to fight mandated rate rollbacks by the Office of Insurance Regulation. "Citizens used policyholder money to hire attorneys so they could sue the government in order to force policyholders to pay even more," Mr. Crist complained.
Mr. Ricker said of his experience with Citizens that in 2003 the insurer was seriously understaffed with no modern technology. Claims adjustment work was totally outsourced, and when eight hurricanes hit between 2003 and 2005, the program was not prepared to deal with them.
He described an operation that was completely overwhelmed by the claims activity, and even the vendors, whom he said did a heroic job dealing with the situation, were no match for the onslaught of claims which reached 1.7 million in 2005, or one in five homes in Southern Florida.
Citizens' system was paper intensive, giving mangers no ability to coordinate claims adjuster activity or manage reports to see what was happening. The insurer also lacked the staffing to deal with number of claims coming into the office, even though that function was outsourced.
"It was a very crazy time," he said. "It was a very frustrating time for everyone."
The answer, he said, was beefing up the number of people the jobs were outsourced to, increasing the number of people needed in key positions in Citizens, and bringing technology onboard to manage another onslaught of claims activity.
Not only has Citizens learned lessons from the event but so has the industry, said Mr. Ricker, and those lessons are "redundancy, redundancy and redundancy, and testing, testing, testing both your systems and your vendors."
The best plans need to be looked at from as many angles as one can find, said Mr. Ricker, and that still may not be enough.
"The scenario you think is going to happen, happens differently," he said.
When Mr. Ricker gave up his Citizens post, Board Chairman Bruce Douglas released a statement accepting the resignation "with regret" and praising his tactical leadership and strategic vision, calling him "the right man in the right place at the right time."
"His talents will be sorely missed," Mr. Douglas said.
Mr. Ricker today heads the consulting firm Focus Insurance Consultancy, LLC, in Tallahassee, Fla.
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