Reinsurers Tell Fla. Panel Rate Freedom Key to Insurance Fix

August 27, 2006

The basic solution to Florida’s hurricane insurance crisis is for consumers to pay more, despite double-digit increases already levied over two years, insurance officials said Thursday, the anniversary of Hurricane Andrew.

Representatives from reinsurance companies, which back up losses for primary insurers like Allstate and Nationwide, told a state panel convened by Gov. Jeb Bush to solve the problem that the industry is over-regulated and buildings aren’t up to code.

“We just need some freedom, or the primary market needs freedom, in order to cover the long-term financial loss that they’re faced with,” said Andrew Castaldi, senior vice president for catastrophe perils at the reinsurance company Swiss Re.

Those on the committee — which is chaired by Lt. Gov. Toni Jennings and includes businessmen, state legislators, a retired teacher, a NASA employee and others — objected to complaints about weak codes, but did not question Castaldi and others on the need for higher premiums.

Angry residents have complained their insurance premiums have doubled, or worse, as eight hurricanes hit the state over the past two years.

Others have had policies canceled or not renewed, because insurers say it’s increasingly unprofitable to write policies in a hurricane-prone state. Florida lawmakers have focused on providing incentives to keep them around, including a measure last session that makes it easier to tap into the state’s Hurricane Catastrophe Fund and hike rates in some areas.

The idea is that such incentives will lure more companies here, creating competition and driving down prices. The same ones were behind reforms enacted after 1992’s Hurricane Andrew, which caused $26.5 billion in losses and killed 51 people in the United States.

Fourteen years later, the newly erected Property and Casualty Insurance Reform Committee still grasped for solutions.

“What we have to do is make sure we balance the incentive for the free market to work with the idea that we have to cushion that blow to the individual homeowner and business owner,” Jennings said.

Thursday’s meeting was the committee’s second, with seven more planned before mid-November. Jennings said the goal was “to come back with realistic, doable solutions,” some of which could be done by a governor’s executive order or emergency rule from insurance regulators, others requiring legislative or federal action.

The salient measures suggested Thursday dealt mostly with mitigating damages before a storm does hit, like educating building officials and laborers about smart construction and informing consumers of insurance incentives for buying storm shutters. To promote preparedness, the state has launched a Web site called, which offers a home inspection and matching grant program.

Still, the committee made no formal decisions. Two separate hours of the six-hour meeting were scheduled for discussing overhaul proposals, but neither happened because they ran out of time.

“I promise you, the entire meeting will pretty much be our options as we move forward,” Jennings said of the next gathering as she convened. “A whole lot of people just want to know how they’re going to pay for their insurance, and that’s our charge.”

Jennings also mentioned the possibility of a special legislative session to tackle the issue, an idea recently floated.

“But we have to have some bona fide recommendations,” she said. “It would be easy to say we are going to make a law and tell the insurance companies they can’t raise rates. Probably some 5 minutes after we do that, there will be no insurance companies in the state of Florida.”

The last thing Phil Doherty, a 66-year-old real estate agent from Merritt Island who attended the meeting, wanted to hear was talk of higher insurance bills. Instead, he said they should be talking about why Florida insurers are allowed to separate themselves from national parent companies, shielding profits from being paid out in claims here, and why the value of lost belongings in a home is consistently underpaid.

He said his rates have risen 60 percent this year, and he now pays five times more for his Florida house than another place he has in Connecticut, on the ocean, that’s worth two times as much.

“They’d better do something soon, because retired people can’t afford to live here,” he said. “They’re leaving, and I might have to leave too.”

Meanwhile in Tallahassee, state Insurance Commissioner Kevin McCarty said he intends to deny a request by First Floridian Auto and Home Insurance Co. to increase homeowners rates by about 63 percent on average statewide, citing higher reinsurance costs.

McCarty said the company didn’t provide adequate proof of its need for the increase. First Floridian has more than 80,000 policies in the state, mostly in the Tampa Bay area and Central Florida.

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