Barney T. Bishop, II: Property insurance remains in a crisis

Rather than blame reinsurers and other private market participants, whose dollars have supported Florida in the aftermath of both windstorms and political turbulence, we should focus on continuing the work begun by leaders in the legislature to reform our market to make it more attractive to capital, more open to competition, more solvent and more stable for Florida’s businesses and homeowners.

The Associated Industries of Florida (AIF) has represented the principles of prosperity and free enterprise in Florida since 1920. As the leading voice of business in Florida, we strongly support free market capitalism and the robust, open competition it needs to thrive. Private businesses are the engine that create jobs and provide needed financial security, goods and services to Floridians. No sector of the Sunshine State needs private capital as much as our deeply challenged property insurance market.

From AIF’s perspective, the number one insurance issue confronting our state is the solvency and stability of Florida’s insurance companies. AIF’s members rely on those insurers to insure critical risks such as fire risk, liability risk, medical malpractice risk, and, of course, the ever-present risk in Florida of hurricanes.

There are, however, two risks they cannot transfer: 1) the risk that their insurance company will not be able to pay when they need it and 2) the risk that, at the same time their claim has gone unpaid, they will be subject an increase in the “hidden hurricane tax” on businesses. Today, all Florida residents, businesses, charities and auto owners are paying taxes in the form of assessments because of the storms 2004 and 2005. Those taxes will continue until at least 2016.

In 2007, Gov. Crist dramatically increased the exposures taken on by our state-run insurer, Citizens Property Insurance Corporation, and the state reinsurance vehicle, the Florida Hurricane Catastrophe Fund (CAT Fund). However, both Citizens, which buys no private reinsurance, and the Cat Fund are actuarially unsound and have been for years. Moreover, instead of transferring risk to the global capital markets through the reinsurance distribution system, these state programs concentrate Florida’s most dire risks within our state, ultimately relying on “hurricane taxes” to pay their claims. At the same time, due to Gov. Crist’s veto this spring of an important incremental reform bill supported by consumers and industry alike, we continue to suffer from abuses from certain public adjusters, mitigation inspectors, and the accelerating sinkhole crises.

Florida is a beautiful state to live in, but because of hurricanes, it is also a risky place. It’s a mistake to unfairly criticize the reinsurers and other private businesses that have risked their capital to insure our beautiful but perilous state. Florida needs private reinsurers and other real capital providers competing to provide real coverage to Florida’s residents, businesses and insurers.

AIF agrees that our insurance system needs significant reforms to reduce the risk and costs of hurricanes. Additionally, we firmly believe the best way to achieve the goal of improving the health of our economy and property insurance market is by fostering a political environment that welcomes business and competition, rather chasing it out of our state. AIF looks forward to working with the state’s new leaders to achieve that goal.

Barney T. Bishop, III,

President

Associated Industries of Florida

Tallahassee