Florida Cabinet Meeting Report: January 13

On Tuesday, January 13, 2009, the Florida Cabinet (Charlie Crist, Governor; Bill McCollum, Attorney General; Charles Bronson, Agriculture Commissioner; Alex Sink, Chief Financial Officer) met in Tallahassee, Florida and discussed several insurance-related matters.  The following is a brief summary of the discussions and actions that took place during the meeting.  To view the meeting agenda, click here.

 

State Board of Administration (SBA)

Item 1:  Minutes of December 9, 2008 meeting were approved without discussion.

Item 2:  The SBA Quarterly Report required by the Protecting Florida’s Investments Act was approved.  Attorney General McCollum commented on the importance of removing investments that have business interests in terrorist countries.

Item 3:  The November 2008, Local Government Investment Pool Management Summary Report was approved.  CFO Sink applauded the handling of Fund B, noting that over the course of one year, the Fund’s “questionable” assets have decreased from $2 billion to approximately $650 million.  CFO Sink also noted that Fund A is fully liquid.

Item 4:  Six appointments to the Participant Local Government Advisory Council were approved.  Governor Crist’s recommended appointments are John Mark Peterson and Daniel Wolfson.  CFO Sink’s recommended appointments are Mary Ellen Elia and Roger B. Wishner.  Attorney General McCollum’s appointments are Patsy Heffner and Karen Nicolai.

 

The Financial Services Commission, Office of Insurance Regulation (“OIR”)

At CFO Sink’s request, Florida Insurance Commissioner Kevin McCarty provided an overview of solvency regulation and the evolution of Florida’s domestic insurance market.  During his presentation, Cabinet members engaged in an open dialogue with Commissioner McCarty.  Below is a brief summary of the discussions.  To view Commissioner McCarty’s presentation, click here.

In 1992, Florida domestic insurers comprised only six percent of the residential market.  Commissioner McCarty noted that residential property exposure, which includes significant coastal exposure is growing, and further coastal exposure is expected.  He noted that stricter building codes and mitigation practices are critical components for both coastal and inland properties. 

Commissioner McCarty noted that Florida domestic insurers have provided $546 million in new capital from 2006 through 2008.  General McCollum expressed concern that Florida domestics have a greater risk of failure.  Commissioner McCarty commented that was a fallacy and noted that large companies (such as State Farm, Nationwide and Allstate) are committed to decreasing risk in coastal areas across the nation, including Florida.  Also, residual markets are growing in coastal states and Florida is considered to be a “supersized” residual market. 

Commissioner McCarty provided a summary of solvency regulation, noting that international, national and local policies should be considered in its analysis.  As a matter of course, the OIR reviews the National Association of Insurance Commissioners (“NAIC”) financial statements submitted by insurers on a quarterly basis.  Further, the OIR examines company records at least every five years as required by law and performs an annual reinsurance data call, the latter of which is unique to Florida. 

Commissioner McCarty concluded with a review of credit markets, adding that the licensure of an insurance company in Florida is not a guarantee of success or solvency, inasmuch as current market conditions have been unfavorable to the insurance industry.  Further, he noted that the AIG situation was not a failure of the state-based system. 

Attorney General McCollum asked about insurance company investment portfolios, to which Commissioner McCarty responded that insurers’ next annual financial statements will be submitted in March and should provide a clearer picture of their financial status.

CFO Sink briefly expressed her thoughts on the successes of take-out companies and Insurance Capital Incentive Build-up Program participants.  She raised a concern that neither take-out companies’ nor Citizens’ rates are actuarially sound.  CFO sink stressed her confidence in the OIR and the importance of its performance in ensuring that Florida domestic companies are financially sound.   Governor Crist echoed the CFO’s comments. 

Following the presentation on Florida domestic companies, Commissioner McCarty proceeded with the OIR Agenda items.

Item 1:  Minutes from the previous meeting were approved without discussion.

Item 2:  The adoption of Proposed Rules 69O-204.010,.020,.030,.040,.050, F.A.C.; Viatical Settlement Providers was approved.  Saying that the Rules promulgate exposure of trade secret information and require reports from transactions in states outside Florida, viatical settlement providers testified about their concerns, specifically regarding the annual reporting form. Cabinet members supported the Rule, citing the need for citizen protections.    

Item 3:  The adoption of Proposed Rule 69O-197.006, F.A.C.; Insurance Administrator Annual Report Form was approved without discussion.

Item 4:  The adoption of Proposed Rule 69O-137.001, F.A.C.; Annual and Quarterly Reporting Requirements was approved without discussion

Item 5:  The adoption of Proposed Rule 69O-138.001; NAIC Financial Condition Examiners Handbook was approved without discussion.

Item 6:  The publication of Proposed Rule 69O-175.008, F.A.C.; Unfair Discrimination in Private Passenger Motor Vehicle Insurance Rates was approved.  A representative from the Florida Insurance Council spoke briefly in opposition to the Rule, noting that the statute was not intended to apply at the time of issuance.  General McCollum noted that the Rule does not harm insurers because they do not have to accept the risk.  Insurance companies will have an opportunity to provide comments on this Rule during the rulemaking process.

Finally, CFO Sink commented on the suspension of the Florida Forever Program that was legislated during the current Special Session.  Two projects approved by the Cabinet have been removed by the Legislature even though the supporting bonds (approximately $10 million) have been approved.  She asked the Department of Environmental Protection to testify before the Cabinet and review the options on these projects.

There being no further business before the Cabinet, the meeting adjourned. 

 

Should you have any questions or comments, please do not hesitate to contact Colodny Fass.

 

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