Florida Regulator, Insurers Clash On Home Rates

Florida Insurance Commissioner Kevin McCarty's announcement yesterday, setting up a battle with home insurers over rate requests, left out key facts about the marketplace, an industry spokesman said today.

"[Mr.] McCarty did not tell the whole story," remarked Sam Miller, executive vice president of the Florida Insurance Council.

The commissioner--in the course of an open editorial letter to the media, revealing that he was denying a 30.3 percent increase request by Florida Farm Bureau Insurance Companies--went on to criticize other insurers.

He said hearings had revealed that, "While the companies did, in fact, receive savings from the Florida Legislature's initiatives, the companies did not plan to pass this savings to the consumer as the Legislature intended. Instead the savings would be used to purchase additional reinsurance, even purchasing reinsurance from their own subsidiaries, and to shore-up their financial surplus.

"Regrettably, Florida Farm Bureau's filing appears to be indicative of filings from the rest of the industry," he wrote.

Mr. Miller said that Farm Bureau negotiated its 2007 hurricane season reinsurance rates prior to the legislature's taking action expanding the Florida Hurricane Catastrophe Fund, providing insurers with low-cost reinsurance for a one-in-60-year storm event, which they were required to buy.

Burt Gindy, a Farm Bureau spokesman, said that Friday the company filed for an administrative hearing to appeal after notice of Mr. McCarty's rejection.

He said that following the legislature's cat fund change, the company tried to negotiate with its private reinsurer, "but they wouldn't cancel everything and give us our money back."

Mr. Miller said what the reinsurer did agree to was to take the portion of money that Farm Bureau paid for a 60-year event, and credit it towards coverage for a one-in-120-year probable maximum loss storm event.

Meeting the requirement for 120-year PML coverage "is eating up savings the legislature wanted homeowners to have," he said.

Mr. McCarty, in his letter, said that predicted saving of 23-to-24 percent from the legislature's moves have not happened.

"As of July 17, the Office has received 46 separate filings for residential policies, of which two ask for rate decreases, nine request no change, and 35 ask for rate increases," he wrote.

"The rate increases are not inconsequential. Of the 35 rate increase requests, the average is 37.3 percent, which in many cases would completely eliminate all savings achieved during the initial presumed factor filings," he added.

"At a time when the property-casualty insurance industry achieved record profits in 2006, combined with additional state resources offered to these companies, the recent spate of rate increase requests is very troubling," he said.

He added that his office is setting up additional rate hearings to "review the reasoning for other companies' rate increase requests," and he is "resolved to use the Florida Statutes and Administrative Rules to ensure that Florida policyholders receive the savings intended by the governor and Florida Legislature. I remain optimistic that the vast majority of companies will do the right thing by their policyholders."

Mr. Gindy said Farm Bureau's "first concern is policyholder surplus. We did pass along savings to policyholders. We renegotiated reinsurance and removed the overlap with the cat fund and passed along savings."

"Right now these are difficult times," said Mr. Miller. After no 2006 Florida hurricane strikes and none so far this year, right now the feeling is, 'We're not going to have more hurricanes.' Well, by September we may have had three."