Unease over Florida’s property insurance stability growing
Mar 24, 2010
This article appeared in the St. Petersburg Times on March 24, 2010.
By John Frank, Times/Herald Tallahassee Bureau
In Print: Wednesday, March 24, 2010
TALLAHASSEE – Facing increasing criticism, Florida Insurance Commissioner Kevin McCarty assured state leaders Tuesday he is working to stabilize the state’s troubled insurance market.
“We are deeply concerned about all … companies doing business in our state to make sure they have the financial wherewithal to pay claims,” McCarty said.
In a presentation to the Cabinet, the state’s chief insurance regulator acknowledged that a new crop of small, Florida-based companies account for half of the state’s property insurance market, even though a number of these companies don’t appear to hold enough money to pay claims in the event of a major storm.
The issue is attracting a critical eye after an investigation by the Sarasota Herald-Tribune revealed more than 2 million Florida families are covered by policies from insurers that exhibited signs of financial weakness.
Chief Financial Officer Alex Sink and Attorney General Bill McCollum expressed grave concerns about the viability of some of these companies, which need only $4 million in capital to start writing policies.
“It looks to me like this whole area is ripe for fraud,” McCollum said.
The unwelcome attention comes as property insurers ask state regulators and lawmakers for higher rates despite a four-year stretch without any major hurricanes.
McCarty said the key to reducing rates is addressing cost drivers. He endorsed a number of proposals being considered by state lawmakers to increase the threshold for solvency from $4 million to $15 million; limit the ability of public adjusters to reopen claims years after a storm; and pass along more costs, increasing rates up to 10 percent with limited oversight.
Another controversial measure opposed by Gov. Charlie Crist would let insurance companies offer unregulated rates, capped at 15 percent after three years. The legislation is expected to get its first hearing in the Senate today.
Either way, it would mean higher insurance rates.
It’s a truth Robert Ritchie, the chief executive of American Integrity Insurance Group in Tampa, acknowledges reluctantly. He appeared at the Cabinet to blame the market on price controls implemented by lawmakers and backed by the governor.
“We are not the poster child for bad behavior,” he said.
John Frank can be reached at jfrank@sptimes.com or (850) 224-7263.
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