Florida Insurance Commissioner Optimistic on Getting Rate Cuts

Although there have been almost three dozen homeowners rate hike requests from carriers in Florida, the state’s Insurance Commissioner Kevin McCarty is “resolved” to give rate cuts to policyholders through a new law that was passed during the January special legislative session. 
 
''I remain optimistic that the vast majority of companies will do the right thing by their policyholders,'' said Insurance Commissioner Kevin McCarty in a letter sent to the editorial boards of major newspapers around the state Monday afternoon. 
 
McCarty, in response to questions from “The Miami Herald,” said the letter was meant ''to reassure consumers that our office will be vigilant in ensuring that the benefits'' of the bill are passed on to Floridians. 
 
McCarty noted that 35 out of 46 companies that filed rate requests through last Tuesday are looking for increases. The average hike is 37.3 percent. 
 
''The recent spate of rate increase requests is very troubling,'' wrote McCarty. 
 
The bill passed in January had expanded the Florida Hurricane Catastrophe Fund so that it could provide cheaper back-up insurance to insurers, which could then pass the savings onto policyholders. Regulators and lawmakers had expected significant rate reductions -- averaging 24 percent -- from insurers because of the bill. 
 
But rather than pass the savings on to consumers, carriers are using the savings to buy additional back-up insurance -- or reinsurance -- in the private market or from their own subsidiaries, “The Miami Herald: reported Saturday. 
 
Regulators got one of their first glimpses of this practice during the Florida Farm Bureau General Insurance's recent public rate hearing, McCarty said. ''Regrettably, Florida Farm Bureau's filing appears to be indicative of filings from the rest of the industry,'' McCarty said in his letter. 
 
Regulators on Friday rejected Florida Farm Bureau's average 30.3 percent rate increase filing, noting the company's ''business decision'' to spend $6 million on more reinsurance rather than passing on the savings was contrary to the intent of the new law. 
 
Some insurers may be adding the additional reinsurance out of fear their financial ratings could slip if they relied too much on the CAT Fund for back-up coverage. This extra insurance would pay some of the losses insurers face after a big storm and protects their underlying capital. 
 
Rating agencies, such as A.M. Best. don't advise insurers to buy more or less reinsurance. But they do consider how much coverage they buy as well as exposure, operating profitability and performance, said Richard Decker and Jeff Mango, senior analysts with the agency. 
 
Rep. Dan Gelber, a Miami Beach Democract, called concerns the CAT Fund possibly won't be able to cover all its risks “a little silly.”' 
 
The House minority leader said the extra layer of CAT Fund coverage would kick in only after a truly catastrophic storm -- the kind seen once in 100 years. 
 
OIR will hold public hearings on many of the rate hike requests in August and early September. 
 
McCarty will provide a full explanation to the Florida Cabinet on what's happening to the expected rate reductions when it meets a week from today.