THE NEWS SERVICE OF FLORIDA: Private Capacity There To Absorb Most State Farm Policies
Sep 15, 2009
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MCCARTY: PRIVATE CAPACITY THERE TO ABSORB MOST STATE FARM POLICIES
By MICHAEL PELTIER
THE NEWS SERVICE OF FLORIDA
THE CAPITAL, TALLAHASSEE, Sept. 15, 2009…Despite difficult times for many insurers during the first half of 2009, there is ample capacity in the existing private market to take up much of the slack should State Farm Florida Insurance Co. follow through on plans to exit the state, Florida’s top insurance regulator told the governor and Cabinet Tuesday.
Speaking to the panel at the behest of Chief Financial Officer Alex Sink, the state’s insurance commissioner said capacity exists within 210 other private property insurers still doing business in Florida to absorb many policyholders affected by State Farm’s decision to get out.
“Most of the companies that expressed an interest in taking lots of State Farm business are …organically grown companies that have been doing business in Florida since the late 1990s,” McCarty said.
McCarty was asked to update the Cabinet on whether recent changes to Florida law to reduce risk for private insurers have resulted in a significant number of new companies writing policies in Florida, a contention made, among others, by Gov. Charlie Crist.
Of the 21 companies that have recently entered the Florida property insurance market, 15 reported underwriting losses for the first two quarters of 2009, giving fuel to those who would say start-ups can’t solve the state’s insurance needs.
But McCarty said start-ups were never seen as the answer and that the established marketplace is taking up some of the slack. About 30 established companies have approached OIR officials and State Farm about taking clients.
McCarty said the new companies’ performance was not unexpected, given the state’s economic picture and start up costs typically incurred by new companies.
“Any start-up companies including insurance companies are going to have situations where those companies fail,” McCarty said.
McCarty defended the agency’s rejection of State Farm’s 47-percent rate hike request earlier this year, but said the agency would be willing to approve higher rates if the company did a better job of making its case.
“Of course we’d be better off if State Farm were here, even in a smaller presence,” McCarty told reporters later.
After the Cabinet meeting, Crist appeared less conciliatory toward State Farm.
“We’re talking about a company that charges the highest rates in the state, or certainly among them,” Crist said. “If that isn’t a company that has already left the state I don’t know what is.”
Florida is not alone in facing property insurance challenges. Many coastal states are also wrangling with how to insure their residents as private insurers mull whether to pull up stakes.
“This is a problem that we’re experiencing from Maine to Texas,” McCarty said. “Large companies are managing their exposure. That’s a code word for they’re not writing on the coast. What we are seeing in Florida is endemic of what we’re seeing across the nation.”
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09/15/09
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