Recap – OIR Rate Hearing on Companion Property & Casualty

 

On Tuesday, October 9, 2007, the Office of Insurance Regulation (“OIR”) held a rate hearing in Tallahassee, Florida, for Companion Property and Casualty Insurance Company, Inc. (“Companion”).  Mike Milnes, OIR Deputy Director of Property and Casualty Product Development, presided over the hearing.  Companion requested a 63.4 percent overall increase for new and renewal homeowners policies, effective October 29, 2007. This hearing was a true-up filing by Companion as required by House Bill 1A, using the presumed factors that were previously adopted by the OIR.  Mr. Milnes noted that the purpose of the presumed factors filing was to reduce rates.  He also noted that the actual filing would be the basis by which a determination of the rates would be made, although public comment would still be heard.

Two officials from Companion provided sworn testimony regarding the rate request.  They provided brief introductory comments describing Companion, noting that the company has $360 million in premium dollars and that the company had entered the Florida market in 1996 to depopulate the Florida Property and Casualty Joint Underwriters Association.  In addition, the officials noted that Companion is committed to writing policies in Florida and that it currently only writes condominium policies.  They stated that the basis for the rate increase request was the overall increase in reinsurance rates, notwithstanding the fact that Companion had purchased reinsurance through the Florida Hurricane Catastrophe Fund (“FHCF”) in an effort to keep its rates as low as possible.

Following the opening remarks, the OIR panel posed a series of questions regarding the rate filing.  The OIR expressed concerns with the high rate increase and the lack of information provided to justify the increase.  Also, the OIR questioned the basis for the annual premium and loss trends.  Companion officials noted that they used a 50 percent credibility and premium trend, which included use of industry average trends, company average trends and independent judgment.  The OIR also asked Companion to explain its general and acquisition expenses, and it was noted that those expenses were not used to attract new business in Florida. 

Next, the line of questioning involved agent commission increases.  The OIR expressed concern over agents receiving larger commissions without providing increased services.  Companion stated that the agents would be working to find additional customers, but the OIR disagreed with that response, given that Companion had already testified that it was not currently seeking to write new policies in Florida.

The OIR next asked whether Companion was using the Florida Public Hurricane Model as the forecasting unit for determining rates.  Companion stated that although it was not, it was looking into it. 

Thereafter, the OIR inquired as to whether Companion was writing new business outside of Florida.  Companion is writing business in South Carolina and Alabama.  The OIR asked about the impact that had on Florida policyholders.  Companion stated that the reinsurance premiums and expected reinsurance recoveries are allocated based on premiums and expected recoveries related to its Florida business, as compared to the other states.

A representative from the Office of the Consumer Advocate testified in support of the OIR’s close scrutiny of this rate filing.  There was no other public testimony during the hearing.

There being no further testimony, the meeting adjourned.  The record was closed, but the OIR will continue to take comments via email at ratehearings@fldfs.com.

 

The above information is intended to be a general summary of the rate hearing and is neither intended to provide specific analysis nor should it be relied upon in making individual business decisions, specific in nature.

Should you have any questions or comments regarding this information, please feel free to contact this office.