Friday, July 30, 2010
| Make Florida More Hurricane-Resistant
published: Sep 28, 2009
by: Eli Lehrer and John Hallman
As hurricane-ridden September passes by, much of the news in Florida appears good: Hurricanes, so far, have stayed away from U.S. coastlines, the Legislature has passed a few common-sense reforms to the state's property insurance system and state CFO Alex Sink says that the state's troubled Hurricane Catastrophe Fund (Cat Fund) has gained a firmer fiscal footing. more... |
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| A catastrophe waiting to happen
published: Sep 15, 2009
by: Jonathan Orszag
This month marks the fourth anniversary of Hurricane Katrina. That raises a simple question: Are we prepared as a Nation for the next mega-catastrophe (one, perhaps, worse than Katrina) that will inevitably strike our country? more... |
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| The Meltdown Next Time: The financial danger nobody knows about.
published: Sep 12, 2009
by: Eli Lehrer
When the insurance giant American International Group was threatened with collapse in late 2008, its credit default swap business and other international operations were cited as the heart of its troubles. But the largest consequence of AIG's uncontrolled failure on consumers' pocketbooks could have come from the domino-like collapse of its businesses writing insurance on boats, cars, homes, lives, and just about everything else. If these businesses fell apart as a result of AIG's overall collapse, the argument went, the contagion could have brought a collapse of everything from retirement savings plans to auto insurance claims payments from companies unconnected to AIG. (In theory, the operations were firewalled from AIG's other operations, but the extremely slow rate at which they've found buyers indicates that many had significant exposure to the company's other woes.) more... |
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Industry, Consumer Groups Rally For And Against Florida ''consumer Choice'' Bill |
by: Chad Hemenway
published: Jun 22, 2009
Letters both supporting and opposing passage of Florida's ''consumer choice'' bill have been arriving at Gov. Charlie Crist's office since shortly after the governor received the bill to sign.
''While the bill may be well-intended, it is seriously flawed,'' wrote Roger Desjadon, spokesman for the homeowners division of the Florida Property & Casualty Association. ''Its result is a two-tiered insurance market for the policyholders of this state. These insurers will be permitted to cherry-pick homeowners in the lowest-risk areas while quoting unregulated rates in higher-risk areas, further exacerbating availability issues for many.''
The bill, HB 117, would allow well-capitalized insurers to charge what they want and give homeowners the right to choose. The so-called ''consumer choice'' bill allows certain insurers to use rates in excess of filed rates so long as the insurer meets one of three conditions: A policyholder surplus of at least $500 million; a surplus of $200 million and a net written premium-to-surplus ratio of 2:1 or lower; and surplus of $150 million with its primary business coming from offering insurance to nonprofit organizations (BestWire, May 5, 2009).
The Competitive Enterprise Institute wrote in to persuade Crist to sign the measure. The bill, CEI said, would provide the state with much-needed capital. Otherwise, the state could be in financial ruin following a storm.
''The current unhealthy concentration of hurricane risk inside the state through the over-reliance on small, Florida-only carriers, or worse, Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund, has the potential of placing Florida in the unenviable position of facing a fiscal calamity after a hurricane,'' wrote Christian R. Camara, director of the CEI's project in Florida. Camara said the institute's research did not suggest higher rates as a result of the legislation -- an allegation pinned on the measure by consumer groups.
Crist has hinted at a veto. At a recent press conference, Crist said deregulation as outlined in the bill ''is not something that is appealing to me, nor is it fair to the customer.''
The governor has until June 27 to act on the bill, also roundly criticized by consumer groups such as the Consumer Federation and the Florida Public Interest Research Group, which held a conference call with media and called for the governor to veto the bill.
The bill is also known as the ''State Farm bill'' because it is meant to lure larger insurers back to Florida. State Farm Florida is currently negotiating with state regulators to agree on a plan that will lead to the insurer's departure from Florida. After the company said it was leaving, several lawmakers said they were told by constituents that they'd rather have the choice to pay higher rates from State Farm, which is leaving more than 1 million property insurance policies behind because the company said it cannot remain solvent under current conditions in Florida. Regulators had rejected the insurer's latest rate request for an increase.
Insurance Commissioner Kevin McCarty released a statement against the measure and has also written the governor to outline the potential negative affects of the legislation. In an interview, McCarty said the bill tilted the playing field in favor of large insurers and it could result in a ''deterioration of our organically grown companies.'' Florida domestics companies have grown to hold a large portion of the market share.
On June 18, A.M. Best Co. downgraded the financial strength rating to B (Fair) from B+ (Good) and issuer credit rating to ''bb'' from ''bbb-'' of State Farm Florida Insurance Co. The outlook was revised to negative from stable. This was based on State Farm Florida's recent ''significant deterioration in earnings and risk-adjusted capitalization and the expectation that this deterioration will continue over the near to intermediate term,'' A.M. Best said (BestWire, June 18, 2009). The top five writers of homeowners multiperil in Florida, according to 2008 A.M. Best Co. state/line product information based on direct premiums written, were: State Farm Group, with a 19.7% market share; Citizens Property Insurance Corp., with 18%; Universal P&C Insurance Co., with 8%; USAA Group, with 5.6%; and Tower Hill Group, with 5%.
(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)
Copyright: A.M. Best Company, Inc.
Source: BestWire Services
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