Florida’s New Insurers Won’t Pick Up State Farm Slack, McCarty Says

Florida Insurance Commissioner Kevin McCarty said the 54 property insurers backed by nearly $5 billion in capital that have been admitted to the state since 2006 can’t be expected to absorb all of the policies left behind when State Farm exits.

McCarty’s was answering Rep. William Proctor, R.-St. Augustine, who has called for more information on the state’s property insurance market in the wake of the veto by Gov. Charlie Crist of Proctor’s pricing deregulation legislation (HB 1171). Supporters believe that bill would have kept State Farm from leaving the state and possibly improved the business climate for other large national insurers.

Crist vetoed the bill, claiming it would lead to higher rates for already-struggling homeowners and would be unfair to the smaller, domestic insurers who rates would remain regulated.

Proctor has questioned McCarty’s claim early in the legislative season that there were 40 new companies in Florida with as much as $4 billion in capitalization that were capable of writing new policies. Proctor wanted to know what companies are writing new policies and how well capitalized they are.

According to McCarty, the new admitted property/casualty companies reported slightly more than 650,000 personal and commercial residential policies in force in Florida as of Dec. 31, 2008.

In addition, the Florida Surplus Lines Service Office reported 1,158 personal and commercial residential policies in force for the new surplus lines companies during the same period.

The list of 54 standard and surplus lines companies includes 14 new insurers started in 2006 and an additional 40 since 2007. The largest writers on the list include Royal Pam and American Integrity. Some are writing only a handful of policies and a few have stopped writing.

“While these 650,000-plus policyholders are a significant portion of the
market – and impressive given the severity of the 2004-2005 storm season — our state does not rely heavily on this segment of the market,” McCarty wrote to Proctor. He said the state has a total of about 200 insurers writing residential policies.

McCarty said he never intended to suggest that the exit of State Farm would be an easy event to overcome.

“The references to these new companies has been to illustrate that even after the 2004 an 2005 hurricane seasons, some investors still view Florida as a place to do business. It is not my intention to downplay the serious effects of State Farm’s exit from the market and
I do not mean to suggest that these new companies formed since 2006 will absorb all of the policies that State Farm plans to cancel,” McCarty wrote to Proctor.

McCarty said that the reduced availability of private insurance in hurricane-prone areas is not unique to Florida.

“While some companies have reduced their exposure due to the hurricane risk in coastal areas, only one national insurer [State Farm] has filed to completely withdraw from the marketplace. The reduction of risk by national carriers is not a phenomenon unique to Florida; in fact, insurance carriers have reduced coastal exposure from Maine to Texas, as evidenced by the need for residual markets in these states,” he stated.

He also noted that the exposure facing Florida’s residual market, Citizens Property Insurance Corp., has actually lessened within the past year and Citizens’ policy count is down around 1 million.

McCarty sought to lessen the political tension with Proctor, offering to meet with him to discuss in person ways to attract more private insurance capital to the state.

“I applaud your commitment to helping solve the problems confronting the Florida property insurance market. Rather than continuing to send letters back and forth, I would like to meet with you in person this summer. While we share a common philosophy of maximizing private capital, I would like to convey some analysis and perspective about my experiences with the Florida property insurance market,” he wrote Proctor.

Topics Florida Carriers Property Market