The Property Casualty Insurers Association of America (PCI) issued the following statement in response to today’s Florida Cabinet meeting. The below statements can be attributed to William Stander, assistant vice president and regional manager for PCI.
“This is a tough time for all Floridians. Property insurance affordability and availability continue to top the list of consumer concerns. Insurers, consumers, and state government face serious challenges as we manage the threats of severe weather and catastrophic risk and seek meaningful long-term solutions that make homes stronger, people safer, and the insurance market stable. We have been very fortunate that our state has dodged two of the largest hurricanes in history – Dean and Felix – this year. But relying on near misses does not solve the problem we all face.
“As insurers, we have consistently urged the state to examine its policies on homeowners insurance and enact meaningful reforms to reduce losses from future storms and make the market more competitive. We have provided credible data showing that when a severe storm does strike Florida (and unfortunately it will), consumers in all parts of the state will be faced with enormous assessments to bail out the rapidly expanding state-run insurer, Citizens.
“We were encouraged today by the message of change that echoed across the board. We are hopeful that this will be the first step in revisiting the risky legislative reforms that were passed in January. The members of the Florida Cabinet expressed their desire to find real long term solutions to the Florida insurance market as opposed to continuing along a road paved with inflammatory rhetoric. That is good news for consumers and insurers.
“Yet despite this new tone, representatives from the Office of Insurance Regulation today made several disturbing statements to the Cabinet that demand responses.
“As we have stated before, state officials and regulators failed to realistically portray the reductions consumers could expect. Specifically, the 24 percent reduction was an estimate made by Bob Hunter, the so-called consumer expert hired by the OIR to price the Special Session legislation. In response to questioning from CFO Sink in today’s Cabinet meeting, Hunter ridiculously stated – not once but twice – that he now says he originally projected a 48 percent savings in the wind portion of the premium.
“From day one we have correctly and truthfully pointed out that the changes to the Cat Fund in HB1A would only affect the wind portion of the premium, which makes up only about half the premium in Florida. As a matter of fact, Mr. Hunter’s own original documents reference the reduction affecting the wind portion of that premium. As a result, the ‘24 percent reduction’ would be half that number…12 percent. That is exactly what insurers have, on average, filed with the Office of Insurance Regulation, as they confirmed today.
“Insurers’ use of risk models was questioned today. Catastrophe risk models are a tool that insurers, reinsurers, and the capital markets use to assist in quantifying the expected cost of future catastrophic events. It should be noted that the state spent millions of taxpayer dollars to commission a public model in an effort to debunk the findings of the private models. To the dismay of our critics, the public model came in higher than the private models.
"While not perfect, risk models provide the most accurate information on the projected damage a future storm will cause and the financial resources that a company must have on hand to pay for all its expected losses. Moreover, such models are relied on heavily by financial rating agencies that assign a value to each insurer's fiscal health. A low financial rating will result in state regulators limiting a company's ability to write new policies and also make it more d