Florida homeowners' market still fragile: another hurricane season brings risk.Two years ago Gov. Charlie Crist Charles Joseph "Charlie" Crist, Jr. (born July 24 1956), is an American politician of the Republican Party and the current Governor of Florida. Crist served as state attorney general from 2003 to 2007.
Crist was born in Altoona, Pennsylvania. put a prayer inside a crack of the famed Western or Wailing Wall Wailing Wall
Western wall where Jews lament the destruction of the Second Temple of Jerusalem. [Judaism: EB, X: 627]
See : Grief in Jerusalem asking that God spare Florida from hurricanes. A year ago, State Sen. Nan Rich Nan Rich is a Democratic member of the Florida Senate, representing the 34th District since 2005. Previously she was a member of the Florida House of Representatives from 2001 through 2004.
Rich attended the University of Florida from 1959 through 1961. (D-Sunrise), followed suit on her trip to Israel.
While standing next to Crist recently, Rich joked to the governor about whether or not someone should fly back to Jerusalem before the kick-off of the 2009 hurricane season Hurricane season refers to a period in a year when hurricanes usually form. For more information see: Tropical cyclone#Times of formation.
For a lists of past seasons, see:
Joking or not, Florida may need it. Despite some changes put in place this year by state lawmakers, Florida's homeowners' insurance market is as fragile as ever. Heading into this hurricane season, the overriding problems are familiar ones: Citizens, the Cat Fund, and capacity.
Citizens Property Insurance Corp. remains overexposed o·ver·ex·pose
tr.v. o·ver·ex·posed, o·ver·ex·pos·ing, o·ver·ex·pos·es
1. To expose too long or too much: Don't overexpose the children to television.
2. for risk, while the state's largest private insurer, State Farm Florida Insurance Co., wants to shutter its property insurance business and move out. The ongoing credit crunch Credit Crunch
An economic condition whereby investment capital is difficult to obtain. Banks and investors become weary of lending funds to corporations thereby driving up the price of debt products for borrowers. continues to present serious challenges for the Florida Hurricane Catastrophe Fund (Cat Fund), the state-created reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. fund, and the price of private reinsurance is also higher this year. The board of Citizens voted in May to forgo purchasing any private reinsurance because of the cost.
The bottom line is that Florida's insurance market has yet to recover fully from the damage done by the eight storms that pounded the state in 2004 and 2005. And while Florida has avoided hurricanes the last two seasons, there is an ongoing fear about the next storm.
The most recent hurricane forecast from Colorado State University Colorado State University, at Fort Collins; land-grant with state and federal support; chartered 1870, opened 1879 as an agricultural college, assumed present name in 1957. There is a veterinary teaching hospital, an agricultural campus, and a research campus. shows an average forecast for the Atlantic, with 12 named storms for the season. The forecasters predict that six of these storms will reach hurricane strength, with two of them becoming major hurricanes. There is a 32 percent chance that one major storm will strike somewhere on the eastern coast of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , which includes Florida.
"We have been very, very blessed since 2005 when the last group of storms hit," said Ron Reagan Ronald Prescott Reagan (born May 20, 1958, Los Angeles, California, U.S.), usually known as Ron Reagan, is the son of the late former President of the United States Ronald Reagan and First Lady Nancy. , a state legislator LEGISLATOR. One who makes laws.
2. In order to make good laws, it is necessary to understand those which are in force; the legislator ought therefore, to be thoroughly imbued with a knowledge of the laws of his country, their advantages and defects; to and an independent insurance agent in Bradenton. "Every year it starts all over again. We have the same odds this year we had last year."
Troubling Times Continue
Citizens remains the state's largest carrier with over one million policies and an exposure of $414 billion statewide. Even with its current budget surplus, a 1-in-100-year storm event could result in nearly $22 billion worth of claims--at least $5 billion short of what the company could afford to pay. Such a storm would likely trigger assessments to Citizens' policyholders and other insurance customers throughout the state.
While lawmakers this year did authorize an end to the Citizens' rate freeze, it will not take effect until 2010--too late to help the balance sheet for this hurricane season.
State Farm Florida, the state's largest private property insurance carrier, says that while it has a surplus now, it cannot sustain itself economically after state regulators turned down a nearly 50 percent rate hike request.
The company announced plans to pull out of the Florida market months ago, but it has not received permission from state regulators as to when that process may start. That means the carrier will not drop anyone prior to or during this hurricane season, since there is a six-month notice provision.
Justin Glover, a spokesman for State Farm, said the company was already projecting insolvency by 2011 even without the prospect of any major storms coming ashore.
"That is an optimistic op·ti·mist
1. One who usually expects a favorable outcome.
2. A believer in philosophical optimism.
op view," said Glover. "If you have hurricanes this year it could speed up this process."
While smaller companies have expanded into the Florida market over the last few years, concerns remain about their viability. Coral Insurance of Hollywood was placed into receivership receivership
In law, state of being in the hands of a receiver, a person appointed by the court to administer, conserve, rehabilitate, or liquidate the assets of an insolvent corporation for the protection or relief of creditors. in April. Another company--People's Trust Insurance Co.--was ordered in March to temporarily stop writing policies after regulators raised concerns, including whether the company was writing policies beyond its claims-paying abilities.
A growing issue for the smaller companies is reinsurance. The Cat Fund, the state-created reinsurance fund that is required for all companies writing business in Florida, has a capacity shortfall that raises doubts about its ability to pay. One of the actuary actuary
One who calculates insurance risks and premiums. Actuaries compute the probability of the occurrence of such events as birth, marriage, illness, accidents, and death. rating agencies used by smaller carriers has begun discussing downgrading some carriers in Florida if they do not have adequate backup financing plans.
Lawmakers agreed to whittle back part of the Cat Fund exposure during the recently concluded session, but the legislation also required companies to pay more into the fund to build up its level of the cash.
"The increased costs of public and private reinsurance and reduced reinsurance capacity will continue to present financial challenges to many companies," said Locke Burt, president of Security First Insurance Co., a Florida-based homeowners' carrier.
McCarty Extols Growth
Insurance Commissioner Kevin McCarty agrees that it is a "challenging, to say the least, economic environment" for property insurance. But McCarty contends that critics are refusing to recognize there has been new growth in Florida.
His office has produced data showing that a combination of newly licensed carriers, including surplus lines carriers, has brought in $10 billion worth of capital between 2006 and the end of 2008.
"How many other markets in mature industries point to new growth?" said McCarty in an eight-page overview of the Florida property insurance market. "...Granted, the new entrants are not of the size of the old-line, major property insurers; but then again new firms do not generally start out as behemoths--they grow into it."
McCarty also said that Citizens and the Cat Fund provide a balance for both consumers and the industry. He pointed out that Citizens' size had peaked before changes were made to it in 2007, and that most carriers themselves choose to have the maximum amount of coverage under the Cat Fund even though they could purchase less.
According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. McCarty, those who think getting rid of Citizens and the Cat Fund would "magically bring a stable equilibrium (Mech.) the kind of equilibrium of a body so placed that if disturbed it returns to its former position, as in the case when the center of gravity is below the point or axis of support; - opposed to
However, some of the very steps that state officials took to improve Florida's property insurance market and reduce exposure have been scuttled due to the severe recession and its impact on state finances.
In January, lawmakers directed that all money paid back to the state as part of its insurance capital incentive build-up program go back into the state's general accounts instead of staying in the program itself. That decision means the build-up program, which started with $250 million to lend out to insurers willing to write new policies in Florida, is essentially dead.
Financial woes have also impacted the My Safe Florida Home program, which sought to encourage home mitigation and thus help owners lower their insurance costs. Despite intense lobbying by Chief Financial Officer Alex Sink Adelaide "Alex" Sink is Chief Financial Officer for the state of Florida. Elected in 2006, Sink is reponsible for managing Florida's tax revenue estimated at $74 billion. As a member of the four person Financial Services Commission, she oversees appointments in the fields of , the Legislature refused to give the program additional money or even allow it to roll over any of the roughly $30 million to $40 million still unspent.
Another popular consumer program, the sales tax sales tax, levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government. holiday that gave people a break on sales taxes if they purchased certain hurricane-related materials, is now a distant memory. The tax break was in place for three straight hurricane seasons, but lawmakers have refused to reinstate To restore to a condition that has terminated or been lost; to reestablish.
To reinstate a case, for example, means to restore it to the same position it had before dismissal. it for the last two years.
By Gary Fineout, Contributing Editor A contributing editor is a magazine job title that varies in responsibilities. Most often, a contributing editor is a freelancer who has proven ability and readership draw.
Top 10 Companies ranked by Policies in Force (Quarter Ending Dec. 31, 2008) Policies Premium Rank Company Name In Force Written 1. Citizens Property Insurance Corp. 1,050,613 $2,325,520,570 2. State Farm Florida Insurance Co. 901,850 $1,170,678,407 3. Universal P&C Insurance Co. 461,040 $524,485,844 4. St. Johns Insurance Co. 198,725 $289,425,495 5. USAA 166,075 $204,263,411 6. Allstate Floridian Insurance Co. 159,562 $149,336,135 7. Asi Assurance Corp. 133,785 $141,381,299 8. Nationwide Insurance Co. of Florida 129,174 $136,667,102 9. Royal Palm Insurance Co. 124,093 $202,346,877 10. Homewise Preferred Insurance Co. 120,845 $185,500,417 (Source: Florida Office of Insurance Regulation)