Florida Insurance Commissioner Testifies Before Senate Ways and Means Committee–March 5

The Florida Senate Policy and Steering Committee on Ways and Means Committee met on March 5, 2009 and, at the request of Chairman J.D. Alexander (R-Lake Wales), heard testimony from Florida’s Insurance Commissioner Kevin McCarty about the Florida Hurricane Catastrophe Fund (“FHCF”) shortfall. 

In his opening remarks, Commissioner McCarty discussed the existing FHCF requirement for bonding capacity and the deep concern of the State Board of Administration with the FHCF’s financing ability.

According to the Commissioner, in February, 2009, Florida Governor Charlie Crist met with U.S. Treasury officials in hopes of securing a federal guarantee for FHCF financing.  Florida Attorney General Bill McCollum is also seeking to accomplish the same goal, and Florida Chief Financial Officer Alex Sink is working with U.S. Senator Bill Nelson on potential FHCF funding legislation.

Following Commissioner McCarty’s prepared remarks, he provided the Committee members (Senators Alexander, Gelber, Hill, Gaetz, Fasano and Lawson) with the following information in response to their inquiries: 

• The timeline to create a stable insurance situation for Florida is “very short–30 to 45 days.”
• The Florida Office of Insurance Regulation will reevaluate the State’s insurance situation in light of the concern that insurers may not have adequate claims paying resources in the event the FHCF can’t meet its obligations.
• In regard to questions about the illegality of State Farm dropping homeowners’ coverage but maintaining their automobile policies, Commissioner McCarty noted that “tying” policies is a violation of Florida law.
• The FHCF is assessing policies for losses resulting from the 2004-2005 hurricane seasons.
• Although State Farm’s withdrawal is not expected to exacerbate concerns about the solvency of take-out insurers during 2009, the impact of downgrades to insurance company ratings based on the inability of the FHCF to meet its funding obligations could pose problems in 2010 and beyond if the bonding market does not improve.
• To address the Citizens Property Insurance Corporation (“Citizens”) rate freeze, the OIR will support an annual review of Citizens’ rate filings that accurately reflects its book of business.

Senator Lawson recommended that the OIR ask State Farm to re-enter the Florida market.  Senator Alexander echoed this.

Senator Mike Fasano stated his sentiment that the financial markets are the main problem and inquired about past OIR approvals of State Farm rate increases.

As the two-hour meeting concluded during the Commissioner McCarty’s questioning, Chairman Alexander adjourned by stating that he would like revisit these issues with the Commissioner as the 2009 Legislative Session moves forward. 

To view the Committee packet, click here.

 

Media coverage of the Committee meeting from The News Service of Florida is reprinted below:

SENATE BUDGET CHIEF TO INSURANCE COMMISSIONER: BRING BACK STATE FARM

By KATHLEEN HAUGHNEY
THE NEWS SERVICE OF FLORIDA

THE CAPITAL, TALLAHASSEE, March 5, 2009… Senate budget chief JD Alexander and Democratic leader Al Lawson implored the state’s insurance commissioner on Thursday to keep State Farm in Florida.

“I’d really like you to all go back and assess why you all should bring State Farm back into this market because I think what you’ve all done is a tragedy it does not make sense,” Lawson, D-Tallahassee, told Insurance Commissioner Kevin McCarty at a Senate Ways and Means Committee meeting.

The company announced in January that it planned to withdraw from the state’s property insurance market because it could not gain approval for higher rates. Company officials said huge loss potential after a major hurricane made it unprofitable for the company to write policies in the state with the rates that state regulators have been willing to approve.

McCarty approved a withdrawal plan by State Farm over the next two years with several conditions. The company’s policies must be transferred to private companies, not Citizens Property Insurance, the state’s last-resort insurer, and its agents must be free to write policies by other insurers.

The company has been reviewing the plan. And the Office of Insurance Regulation has been negotiating with 15 companies that have agreed to take up the bulk of the policies written by State Farm.

Alexander said his office has been inundated by calls from constituents who have been switching their policies to other companies and finding much higher rates that they don’t find affordable.

“I think it’s a great loss to the state,” said Alexander, who is from Polk County – also home to State Farm Florida’s headquarters.

But the state cannot necessarily force the insurance company to do business in Florida. Nor can it force them to take on the same level of business as they have in the past.

“If you look at the issue over time, State Farm has been downsizing,” said Office of Insurance Regulation spokesman Edward Domansky. “It’s the matter of the risk that they’re not willing to take in Florida.”

http://www.newsserviceflorida.com

 

Should you have any questions or comments, please contact Colodny Fass.

 

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