Florida's Insurance Crisis - Huge Risk

Transcription

1 BestWeek (A.M. Best publication) Florida Agents Association Blasts Regulatory Environment, Proposed Legislation um= BestWire - 05/14/ :47 pm Subscription Only With just a couple weeks to go until hurricane season, Jeff Grady, president and chief executive officer of the Florida Association of Insurance Agents, had no words of encouragement for the state's... Date: 05/14/09 Source: BestWire (Dateline: TALLAHASSEE, Fla.) Word Count: 458 Copyright 2009 by A.M. Best Company, Inc. ALL RIGHTS RESERVED Bradenton Herald Insurance experts sound alarm Florida ill-equipped to pay future storm claims, they say Posted on Fri, May. 15, 2009 By BRIAN NEILL bneill@bradenton.com Representatives from Florida s property insurance industry sent out a warning signal Thursday about the state s inability to pay for damages from a serious storm in the future. During a morning conference call, officials from the Florida Association of Insurance Agents and the Consumer Federation of the Southeast said that the state faces putting consumers at great risk through property insurance rates that are being kept too low. In our state government s pursuit of artificially low rates, Florida has, in essence, created a fragile system of insurance that leaves Florida homeowners and taxpayers at great financial risk, said Jeff Grady, president and chief executive officer of the Florida Association of Insurance Agents. And we re really one large storm away from some very difficult circumstances. Grady said that the get-tough stance on property insurance rates initiated by legislators and Florida Gov. Charlie Crist in 2007 has only served to drive away private insurers and leave carriers who remain with policy premiums that can t sustain claims payments from future hurricanes.

2 But Ed Domanksy, a spokesman for the Florida Office of Insurance Regulation, which sets insurer rates in the state, said he believes the rate discussion has been overblown. Domansky said every insurance company is treated equally by the agency in terms of determining rates needed to maintain financial solvency. So whether it s State Farm, Allstate or a new company, they must all meet the same strict solvency standards, Domansky said. And despite what some in the industry say, there is still competition and enticement to do business in Florida, Domansky said. There is competition in the market, Domansky said. Some people seem to be portraying this as, if you don t have State Farm you have Citizens. That is completely incorrect. We ve had about 30 new companies since There is choice. There is competition. A survey of private insurers in the state revealed that in 2008, a year with no severe windstorms, 40 percent of insurers showed profit losses, Grady said. He acknowledged, however, that some of those losses were attributable to investments the companies lost money on during the economy s downturn. The much-publicized $12 billion deficit in the Florida Hurricane Catastrophe Fund, which provides backup insurance for property insurers in the state, is further proof that the state is ill-equipped to handle a major hurricane, Grady said. Consumer advocate Walt Dartland, executive director of the Consumer Federation of the Southeast, warned that taxpayers and policyholders could be saddled with enormous debt should a storm like 2005 s Hurricane Katrina hit Florida. The consumers face a serious dilemma here, Dartland said. It is either pay now or pay later, he said. We can t afford as consumers to turn our backs on the realities of the market. If we don t do this (allow higher rates), the worst scenario is that in Florida we will have a hurricane like Katrina and we will have a disaster like we had in New Orleans. And that is something we simply can t afford. Grady said state-created Citizens Property Insurance Corp. must also have rates that are commensurate with the market to allow more competition in the state. Legislators have proposed incremental increases in Citizens rates the first being a statewide increase of 10 percent. However, industry experts have said Citizens rates should rise anywhere from 40 to 55 percent to be considered actuarially sound. FAIA Executive Vice President Scott Johnson said a Senate bill sponsored by Bradenton Republican Mike Bennett that is now before the governor that would deregulate rates of

3 certain insurers is encouraging but still has problems. Specifically, Johnson said the bill s proposal to allow what the market will bear rates from certain large insurers, while denying that freedom to smaller players, will kill competition. It deregulates a few select insurance companies who may qualify but it does so at the expense of others who don t, Johnson said. Still, Johnson said it was encouraging that the discussion of rate revisions was taking place. Bennett said he understood the fear that his bill may hurt competition but believes it s unfounded. I would have to say that may be a valid concern but my concern was, if we were going to deregulate the rates, we would have to do this for at least two years to make sure it worked, Bennett said. So we wanted to do that with the bigger companies at first. Bennett added that by bigger companies, he meant the national insurers and not their spin-offs in Florida, often called pup companies. Even State Farm of Florida does not qualify for these rates, Bennett said. They have to bring the national company back in. We wanted it so the bigger companies would have to play. The Buzz: Tampa Bay.com As Crist goes to 'cane conference, insurance agents warn of 'disaster' May 14, 2009 As Governor Charlie Crist attended the annual hurricane conference in Miami (and made clear his concerns about a proposed law deregulating large insurers' rates), a group representing Florida's independent insurance agents held a grim conference call warning that just one bad storm will send the Sunshine State and its homeowners into financial "disaster." Among the problems, pointed out by Florida Association of Insurance Agents President Jeff Grady:

4 FAIA found that nearly 40 percent of Florida s residential property insurers lost money last year after three years of no hurricanes. "It s a time when the wind hasn t blown. It suggests there is a need to more accurately price risk in this state. While only 16 percent of Florida homeowners are covered by the state-backed Citizens, their coverage is subsidized by assessments on the remaining 84 percent, many of whom get coverage from smaller insurance companies that are less than three years old. Those who don t own property also pay assessments on their auto, renters and small business coverage. FAIA says employers would have to pay a percentage of all the assessment taxes, which could also be passed on to consumers in the form of higher prices. Demotech, the company that rates newer, smaller insurers, recently threatened to downgrade its ratings of some insurers who relied too heavily on the underfunded CAT fund when tallying their assets. Such a downgrade could leave tens of thousands of homeowners in default of mortgage requirements. Claims Journal Florida Agents, Consumer Advocate: Low Insurance Rates Hurt Claims Ability By Andrew G. Simpson May 15, 2009 With the start of the hurricane season just a few weeks away, a leading Florida consumer advocate joined independent agents at a press conference today to warn that property insurance rates need to be raised if insurers are going to be able to pay claims on time or at all in the event a major hurricane hits. Florida homeowners can "pay now or pay later," said Walter Dartland, executive director of the Consumer Federation of the Southeast, suggesting that if insurance companies are not allowed to adjust their prices upward as needed to cover potential losses from a major storm now, then insurers might not be able to pay their claims and taxpayers could end up footing the unpaid bills. "We can't turn our backs on the reality of the market," Dartland said. The state's "artificially low" rates for state-backed Citizens Property Insurance, strict rate regulation on private insurers, an underfunded state hurricane fund and an unfriendly regulatory climate have created a "fragile system" that is not sustainable, said Jeff Grady, president and CEO, Florida Association of Independent Agents (FAIA), at a joint conference with the consumer organization.

5 Grady said that despite being asked, Congress has not embraced the idea of bailing out Florida should its insurance system fall short of what's needed after a hurricane. Dartland said he thinks Insurance Commissioner Kevin McCarty should take another look at some of his rate decisions. "Rates have to go up," he said. According to Grady, the need for pricing freedom is critical given that, based on his group's research, 40 percent of the property insurers writing in Florida reported net losses in 2008, a year in which no major storms hit. He called for pricing deregulation for all property insurers and not just for State Farm and a select group of large carriers, which would happen if Gov. Charlie Crist signs legislation passed by lawmakers in the recently-ended session. Grady stopped short of endorsing that legislation even though it deregulates pricing because he said it continues the subsidies for Citizens and it helps larger insurers but not the many smaller domestic insurers that may need the pricing flexibility more. State Farm's Florida subsidiary is leaving the state because it has not been granted home insurance rate increases it says it needs. State regulators and the insurer are still negotiating the exact terms of the withdrawal, which affects nearly one million policyholders. Grady noted that a major part of the problem is that private insurers must compete with Citizens, whose premiums are below what they should be and subsidized. "Citizens can get into every taxpayer's wallet...private carriers can't do that," said Grady. Citizens' rates are as much as 40 to 50 percent under what they should be, according to actuaries. Citizens' rates are slated to rise somewhat over the next year as a result of new legislation allowing the insurer to raise prices up to 10 percent on individual policies. But Grady said that while this is "a good start" in the right direction, it is not enough to attract more private carriers or solve the underfunding problems. He said it might prompt some property owners to migrate to the private market but not many. At the same time that they were sounding an alarm about an immediate crisis, the agents found room for hope in the longer term. The fact that both the House and Senate passed the measure to deregulate rates for State Farm and large insurance companies could be a sign that there is "a turning of the tide" in sentiment among lawmakers, according to Scott Johnson, vice president and chief lobbyist for FAIA. "There are good and bad points to this bill but at least it elevates the debate to whether the system is sustainable," he said. Connect 10 Tampa Bay

6 Can Florida's insurers afford to back a hurricane? May 15, 2009 TALLAHASSEE -- Florida property owners may have to brace for more than just high winds this coming hurricane season. Insurance advocates warn that the state lacks the financial backing if a hurricane the size of Katrina were to hit Florida, and could result in nonpayment of claims. "In our state government s pursuit of artificially low rates Florida has in essence created a fragile system of insurance that leaves Florida homeowners and tax payers at great financial risk," said Jeff Grady, president of Florida Association of Insurance Agents, in a news conference Thursday. Gov. Charlie Crist has championed lower insurance rates and vilified big insurance. State regulators denied State Farm Florida an average 47-percent rate increase and is pulling out of the Florida property-insurance market. Grady said about 40 percent of insurance carriers in Florida posted a net loss in 2008, a year without a hurricane landfall in Florida. "This is an indication to us that artificially suppressed rates are keeping some of these companies from being able to price the wind risk adequately," Grady said. Some were lukewarm to a bill that passed the recent legislative session that attempts to deregulate property insurance in Florida. The bill (SB 2036) authorizes certain insurance carriers to use a rate in excess of applicable filed rate. "It deregulates a few select insurance companies who may qualify but it does so at the expense of other carriers who don t," said Scott Johnson, vice president of FAIA. "The ones it does deregulate are the largest." By Stephen D. Price, Florida Capital Bureau First Coast News Property Insurers Say 'Not Enough Money' May 14, 2009 by Brittany Benner, Capital Bureau

7 TALLAHASSEE, FL -- Florida's Association of Insurance Agents hopes to bring attention to the shortfall in the state's CAT fund and its potential inability to pay claims if a major storm strikes this hurricane season. FAIA President and CEO Jeff Grady described Florida's property insurance market as "grave." He pointed out that the state's CAT fund--and re-insurance provider for thousands of insurance companies across the state--is about $12 billion short from being able to pay out claims, should the maximum bailout be required. As a result of that shortfall, Demotech (an insurance credit rating agency) continues threatening to downgrade ratings on those under-funded companies that use the CAT fund for re-insurance; that could jeopardize thousands of mortgages across the state. Grady said there are a number of potential solutions, including de-regulation legislation, changes to the current rating system, and finding a way to fill the $12 billion gap in the CAT fund. Given the current economic climate, the latter solution is no longer as easy as it used to be by making a "quick buck" on Wall Street. "We will be active and trying to promote the message of a more inviting regulatory system in our state and legislation that helps improve the marketplace in terms of sustainability and stability, rather than just simply lower prices," said Grady. Despite two years of relatively quiet storm seasons, Grady said 40% of Florida's residential property insurers lost money last year. FAIA represents more than 2,000 insurance companies across the state. Florida's hurricane season begins June First Coast News. All rights reserved. This material may not be published, rewritten, or redistributed. Florida Capital News Insurance industry warns of tenuous financial state Back Article published May 15, 2009 By Stephen D. Price Florida Capital Bureau Florida property owners may have to brace for more than just high winds this coming hurricane season. Insurance advocates warn that the state lacks the financial backing to withstand a hurricane the size of Katrina hitting Florida, and that could result in nonpayment of claims.

8 "In our state government's pursuit of artificially low rates Florida has in essence created a fragile system of insurance that leaves Florida homeowners and tax payers at great financial risk," said Jeff Grady, president of Florida Association of Insurance Agents, in a press conference Thursday. Gov. Charlie Crist has championed lower insurance rates and vilified big insurance. State regulators denied State Farm Florida an average 47-percent rate increase, and the company is pulling out of the Florida property-insurance market. Grady said about 40 percent of insurance carriers in Florida posted a net loss in 2008, a year without a hurricane landfall in the state. "This is an indication to us that artificially suppressed rates are keeping some of these companies from being able to price the wind risk adequately," Grady said. Some were lukewarm to a bill that passed the recent legislative session that attempts to deregulate property insurance in Florida. The bill (SB 2036) authorizes certain insurance carriers to use a rate in excess of applicable filed rate. "It deregulates a few select insurance companies who may qualify but it does so at the expense of other carriers who don't," said Scott Johnson, vice president of FAIA. "The ones it does deregulate are the largest." Walter Dartland, executive director of the Consumer Federation of the Southeast, said consumers face a serious dilemma. "Either pay now, or pay later," Dartland said. "We just can't afford as consumers to turn our backs on the market.... Paying more for insurance now is probably better than having worthless or no insurance at all." Florida Times-Union Insurance groups sound the alarm on property market 15/story/insurance_groups_sound_the_alarm_on_property_market May 15, 2009 By Brandon Larrabee TALLAHASSEE The state s property insurance troubles could imperil mortgages and a pair of measures approved in the just-completed legislative session isn t enough to solve the problem, according to industry and consumer groups.

9 During a conference call Thursday, two weeks before the official start of hurricane season, representatives with the Florida Association of Insurance Agents and the Consumer Federation of the Southeast painted a bleak picture of the current property insurance market in the state and what might happen if a major storm hit. One of the dangers they highlighted was a warning by a national insurance rating company that it might downgrade some property insurers in the state. If a rating agency were to take this step, tens of thousands of Floridians would be in default on their mortgage, said Jeff Grady, president of the insurance agents group. Under the terms of most mortgages, homeowners must have insurance from a properly rated company. Insurers currently buy extra coverage from the Florida Hurricane Catastrophe Fund, a state-backed reinsurance agency, so they can cover claims in the event of a storm. But the state estimated the fund could come up billions short if a major hurricane strikes, which led to the warning by Ohio-based Demotech Inc. The Legislature approved a bill that would allow the fund to gradually shed some of its responsibilities for paying after a major hurricane. That measure is headed to Gov. Charlie Crist to sign. Crist has stopped just short of threatening to veto another measure, sponsored in the House by Rep. Bill Proctor, R-St. Augustine, that would allow companies with large reserves to offer insurance policies at essentially unregulated prices. Crist consistently warned about allowing insurance rates to rise too quickly but anger sparked by State Farm Florida s decision to leave the state helped push the bill through the Legislature. State Farm announced it was pulling out of the property insurance market about two weeks after Insurance Commissioner Kevin McCarty rejected the company s request for a rate increase that would have averaged 47 percent across the state. The insurance association and the Consumer Federation said Proctor s measure could allow the large insurance companies to jack up premiums on undesirable policies essentially dumping them into other private companies or state-run Citizens Insurance Property Corporation while offering low prices on more desirable, inland properties, perhaps only temporarily. There s no guarantee they won t raise their rates, said Walter Dartland, executive director of the Consumer Federation, and then disappear the year after that brandon.larrabee@jacksonville.com, (678) Riverside Ave. Jacksonville, FL Copyright The Florida Times-Union. All Rights Reserved. Privacy Policy Contact Us Advertising

10 Florida Today Advocates: Florida insurers can't handle Katrina-sized storm May 14, 2009 BY STEPHEN D. PRICE FLORIDA TODAY TALLAHASSEE -- Florida property owners may have to brace for more than just high winds this coming hurricane season. Insurance advocates warn that the state lacks the financial backing if a hurricane the size of Katrina were to hit Florida, and could result in nonpayment of claims. "In our state government s pursuit of artificially low rates Florida has in essence created a fragile system of insurance that leaves Florida homeowners and tax payers at great financial risk," said Jeff Grady, president of Florida Association of Insurance Agents, in a news conference Thursday. Gov. Charlie Crist has championed lower insurance rates and vilified big insurance. State regulators denied State Farm Florida an average 47-percent rate increase and is pulling out of the Florida property-insurance market. Grady said about 40 percent of insurance carriers in Florida posted a net loss in 2008, a year without a hurricane landfall in Florida. "This is an indication to us that artificially suppressed rates are keeping some of these companies from being able to price the wind risk adequately," Grady said. Some were lukewarm to a bill that passed the recent legislative session that attempts to deregulate property insurance in Florida. The bill (SB 2036) authorizes certain insurance carriers to use a rate in excess of applicable filed rate. "It deregulates a few select insurance companies who may qualify but it does so at the expense of other carriers who don t," said Scott Johnson, vice president of FAIA. "The ones it does deregulate are the largest."

11 Gannett blog Insurance-agents association warns of coming storm f954e89af555631b0a3fc79&plckcontroller=personablog&plckscript=personascript&pl ckelementid=personadest&plckpersonapage=blogviewpost&plckpostid=blog%3a5a7a c6f4ef954e89af555631b0a3fc79post%3ac8e4a89f d b cda&sid=sitelife.tallahassee.com tallahassee.com Update Capitol News from Florida's seat of government Posted 5/14/2009 1:32 PM EDT on tallahassee.com Florida property owners may have to brace for more than just high winds this coming hurricane season. Insurance advocates warn that the state lacks the financial backing if a hurricane the size of Katrina were to hit Florida, and could result in nonpayment of claims. "In our state government s pursuit of artificially low rates Florida has in essence created a fragile system of insurance that leaves Florida homeowners and tax payers at great financial risk," said Jeff Grady, president of Florida Association of Insurance Agents, in a news conference Thursday. Gov. Charlie Crist has championed lower insurance rates and vilified big insurance. State regulators denied State Farm Florida an average 47-percent rate increase and is pulling out of the Florida property-insurance market. Grady said about 40 percent of insurance carriers in Florida posted a net loss in 2008, a year without a hurricane landfall in Florida. "This is an indication to us that artificially suppressed rates are keeping some of these companies from being able to price the wind risk adequately," Grady said. Some were lukewarm to a bill that passed the recent legislative session that attempts to deregulate property insurance in Florida. The bill (SB 2036) authorizes certain insurance carriers to use a rate in excess of applicable filed rate. "It deregulates a few select insurance companies who may qualify but it does so at the expense of other carriers who don t," said Scott Johnson, vice president of FAIA. "The ones it does deregulate are the largest." --Stephen D. Price

12 Copyright 2009 Tallahassee Democrat. All rights reserved. Use of this site signifies your agreement to the Terms of Service and Privacy Policy, updated March Insurance Journal Florida Agents, Consumer Advocate Agree: Insurance Rates Must Go Up With the start of the hurricane season just a few weeks away, a leading Florida consumer advocate joined independent agents at a press conference today to warn that property insurance rates need to be raised if insurers are going to be able to pay claims on time or at all in the event a major hurricane hits. Florida homeowners can "pay now or pay later," said Walter Dartland, executive director of the Consumer Federation of the Southeast, suggesting that if insurance companies are not allowed to adjust their prices upward as needed to cover potential losses from a major storm now, then insurers might not be able to pay their claims and taxpayers could end up footing the unpaid bills. "We can't turn our backs on the reality of the market," Dartland said. The state's "artificially low" rates for state-backed Citizens Property Insurance, strict rate regulation on private insurers, an underfunded state hurricane fund and an unfriendly regulatory climate have created a "fragile system" that is not sustainable, said Jeff Grady, president and CEO, Florida Association of Independent Agents (FAIA), at a joint conference with the consumer organization. Grady said that despite being asked, Congress has not embraced the idea of bailing out Florida should its insurance system fall short of what's needed after a hurricane. Dartland said he thinks Insurance Commissioner Kevin McCarty should take another look at some of his rate decisions. "Rates have to go up," he said. According to Grady, the need for pricing freedom is critical given that, based on his group's research, 40 percent of the property insurers writing in Florida reported net losses in 2008, a year in which no major storms hit. He called for pricing deregulation for all property insurers and not just for State Farm and a select group of large carriers, which would happen if Gov. Charlie Crist signs legislation passed by lawmakers in the recently-ended session. Grady stopped short of endorsing that legislation even though it deregulates pricing because he said it continues

13 the subsidies for Citizens and it helps larger insurers but not the many smaller domestic insurers that may need the pricing flexibility more. Grady noted that a major part of the problem is that private insurers must compete with Citizens, whose premiums are below what they should be and subsidized. "Citizens can get into every taxpayer's wallet...private carriers can't do that," said Grady. Citizens' rates are as much as 40 to 50 percent under what they should be, according to actuaries. Citizens' rates are slated to rise somewhat over the next year as a result of new legislation allowing the insurer to raise prices up to 10 percent on individual policies. But Grady said that while this is "a good start" in the right direction, it is not enough to attract more private carriers or solve the underfunding problems. He said it might prompt some property owners to migrate to the private market but not many. At the same time that they were sounding an alarm about an immediate crisis, the agents found room for hope in the longer term. The fact that both the House and Senate passed the measure to deregulate rates for State Farm and large insurance companies could be a sign that there is "a turning of the tide" in sentiment among lawmakers, according to Scott Johnson, vice president and chief lobbyist for FAIA. "There are good and bad points to this bill but at least it elevates the debate to whether the system is sustainable," he said. Miami Herald blog Just in time for 'cane season, insurance agents warn of 'disaster' May 14, 2009 As Governor Charlie Crist attended the annual hurricane conference in Miami (and made clear his concerns about a proposed law deregulating large insurers' rates), a group representing Florida's independent insurance agents held a grim conference call warning that just one bad storm will send the Sunshine State and its homeowners into financial "disaster." Among the problems, pointed out by Florida Association of Insurance Agents President Jeff Grady: FAIA found that nearly 40 percent of Florida s residential property insurers lost money last year after three years of no hurricanes. "It s a time when the wind hasn t blown. It suggests there is a need to more accurately price risk in this state.

14 While only 16 percent of Florida homeowners are covered by the state-backed Citizens, their coverage is subsidized by assessments on the remaining 84 percent, many of whom get coverage from smaller insurance companies that are less than three years old. Those who don t own property also pay assessments on their auto, renters and small business coverage. FAIA says employers would have to pay a percentage of all the assessment taxes, which could also be passed on to consumers in the form of higher prices. Demotech, the company that rates newer, smaller insurers, recently threatened to downgrade its ratings of some insurers who relied too heavily on the underfunded CAT fund when tallying their assets. Such a downgrade could leave tens of thousands of homeowners in default of mortgage requirements. Posted by Shannon Colavecchio on May 14, 2009 Permalink National Underwriter P&C Fla. Agent Group Blasts Lawmakers Insurance Stance Lawmakers-Insurance-Stance.aspx National Underwriter Property And Casualty Insurance News. By MARK E. RUQUET Published 5/14/2009 NU Online News Service, May 14, 4:04 p.m. EDT Officials of a Florida independent agent s trade group hit state legislators today for what they said were actions on insurance putting homeowners at financial risk in the event of a big hurricane. The state s pursuit of artificially low rates has created a situation that leaves the state s homeowners and property owners at risk and only one huge storm away from very difficult circumstances, said Jeff Grady, president and chief executive officer of The Florida Association of Insurance Agents (FALA). Mr. Grady who spoke at a press conference also put out a statement saying Florida is one storm away from disaster. During the conference, he said there are growing warning signs that the state s quest for short term savings at the expense of a stable insurance market makes Florida an unsupported insurance island that might collapse under its own weight.

15 With the beginning of the hurricane season only a few weeks away, he said there is a state Hurricane Catastrophe Fund shortfall estimated as high as $12 billion. In view of the unwillingness of the federal government to support a bailout, the statecreated insurer of last resort, Citizens Property Insurance Corp., could see a true test of its viability if a large hurricane hits this year, according to Mr. Grady. The current situation could lead to a downgrade in insurers rating, a default on homeowners mortgage requirements and the inability of insurers to pay claims if no remedy is found, he warned. Of more concern, during a three year period when the state has not suffered a major hurricane, 40 percent of the state s residential insurers lost money last year, said Mr. Grady. The major problem with Florida s insurance industry is that Citizens, instead of working as the insurer of last resort by charging rates higher than standard line insures, is competitive with them, noted Scott Johnson, vice president of FAIA. Mr. Johnson commended legislators for passing a bill that would allow for properly reserved insurers to charge what the market will bear, but noted the bill only affects the state s largest carriers. To adequately fund the insurance market, all rates should be deregulated, he said, and the competitive pricing by Citizens should end. He said the current situation is simply unsustainable. Walter Dartland, executive director for the Consumer Federation of the Southeast, said it would be better for the state s homeowners to pay now than suffer the consequence of insurers who are not in a position to pay claims. To reduce the cost of insurance, he urged homeowners to fortify their homes against hurricanes, study information enclosed in their policies aimed at reducing homeowner s cost of insurance, and to talk with their independent agents about how to reduce costs. He said the major problem with lawmakers making the tough decisions to ensure a stable insurance market is their fear that they won t be re-elected if rates are allowed to rise. Florida is an expensive place to live, he said, and for people who live on the water, they have to pay a premium to live there. We have to be reality based, he said. NU Online News Service, May 14, 4:04 p.m. EDT Officials of a Florida independent agent s trade group hit state legislators today for what they said were actions on insurance putting homeowners at financial risk in the event of a

16 big hurricane. The state s pursuit of artificially low rates has created a situation that leaves the state s homeowners and property owners at risk and only one huge storm away from very difficult circumstances, said Jeff Grady, president and chief executive officer of The Florida Association of Insurance Agents (FALA). Mr. Grady who spoke at a press conference also put out a statement saying Florida is one storm away from disaster. During the conference, he said there are growing warning signs that the state s quest for short term savings at the expense of a stable insurance market makes Florida an unsupported insurance island that might collapse under its own weight. With the beginning of the hurricane season only a few weeks away, he said there is a state Hurricane Catastrophe Fund shortfall estimated as high as $12 billion. In view of the unwillingness of the federal government to support a bailout, the statecreated insurer of last resort, Citizens Property Insurance Corp., could see a true test of its viability if a large hurricane hits this year, according to Mr. Grady. The current situation could lead to a downgrade in insurers rating, a default on homeowners mortgage requirements and the inability of insurers to pay claims if no remedy is found, he warned. Of more concern, during a three year period when the state has not suffered a major hurricane, 40 percent of the state s residential insurers lost money last year, said Mr. Grady. The major problem with Florida s insurance industry is that Citizens, instead of working as the insurer of last resort by charging rates higher than standard line insures, is competitive with them, noted Scott Johnson, vice president of FAIA. Mr. Johnson commended legislators for passing a bill that would allow for properly reserved insurers to charge what the market will bear, but noted the bill only affects the state s largest carriers. To adequately fund the insurance market, all rates should be deregulated, he said, and the competitive pricing by Citizens should end. He said the current situation is simply unsustainable. Walter Dartland, executive director for the Consumer Federation of the Southeast, said it would be better for the state s homeowners to pay now than suffer the consequence of insurers who are not in a position to pay claims. To reduce the cost of insurance, he urged homeowners to fortify their homes against hurricanes, study information enclosed in their policies aimed at reducing homeowner s

17 cost of insurance, and to talk with their independent agents about how to reduce costs. He said the major problem with lawmakers making the tough decisions to ensure a stable insurance market is their fear that they won t be re-elected if rates are allowed to rise. Florida is an expensive place to live, he said, and for people who live on the water, they have to pay a premium to live there. We have to be reality based, he said. News-Press Homeowners at risk if big storm hits state May 15, 2009 By Stephen D. Price The News-Press Capital Bureau TALLAHASSEE - Florida property owners may have to brace for more than just high winds this coming hurricane season. Insurance advocates warn the state lacks the financial backing needed if a hurricane the size of Katrina were to hit Florida, and could result in nonpayment of claims. "In our state government's pursuit of artificially low rates, Florida has, in essence, created a fragile system of insurance that leaves Florida homeowners and tax payers at great financial risk," Jeff Grady, president of Florida Association of Insurance Agents, said in a press conference Thursday. Gov. Charlie Crist has championed lower insurance rates and vilified big insurance. State regulators denied State Farm Florida an average 47-percent rate increase and the company is pulling out of the Florida property-insurance market. Grady said about 40 percent of insurance carriers in Florida posted a net loss in 2008, a year without a hurricane landfall in the state. "This is an indication to us that artificially suppressed rates are keeping some of these companies from being able to price the wind risk adequately," Grady said. Some were lukewarm to a bill that passed the recent legislative session that attempts to deregulate property insurance in Florida.

18 The bill, SB 2036, authorizes certain insurance carriers to use a rate in excess of applicable filed rate. "It deregulates a few select insurance companies who may qualify but it does so at the expense of other carriers who don't," said Scott Johnson, vice president of FAIA. "The ones it does deregulate are the largest." Walter Dartland, executive director of the Consumer Federation of the Southeast, said consumers face a serious dilemma. "Either pay now, or pay later," Dartland said. "We just can't afford as consumers to turn our backs on the market.... Paying more for insurance now is probably better than having worthless or no insurance at all." THE NEWS SERVICE OF FLORIDA INSURANCE AGENTS; MIXED MESSAGE ON HB May 14, 2009 By MICHAEL PELTIER THE CAPITAL, TALLAHASSEE, May 14, 2009 Insurance agents say they don t quite know what to think about a measure traveling to the governor s desk to free some insurers from state oversight when it comes to setting property insurance premiums. On one hand, HB 1171 breaks historic ground by letting the free market dictate the cost of property insurance premiums. On the other hand, it targets the wrong companies, agents contend. The Florida Association of Insurance Agents on Thursday suspended official judgment on whether Gov. Charlie Crist should sign legislation that surprised at least one of its sponsors by making to Crist s desk at all. What is clear is the need for reform, says Jeff Grady: president of the Florida Association of Insurance Agents. With the state now acting as Florida s largest property insurer, nothing less than dramatic reform will be enough to ensure that property owners are protected in the event of a major storm, he said. With the state able to reach only its most basic level of coverage, property owners could be on the hook for up to $12 billion in hurricane losses the state cannot get from the private market. Florida has in essence created a fragile system of insurance that leaves Florida homeowners and tax payers at risk, Grady told reporters Thursday. We re only one

19 storm away. One response that unexpectedly gained traction was allowing companies to circumvent the Office of Insurance Regulation s oversight of premiums. On May 1, lawmakers sent SB 1171 to the governor. It allows large insurers to raise premiums without the approval of state regulator. About 15 large insurers could do so if the measure is approved. That includes State Farm Insurance Co., which has threatened to leave the state because it says it can t get approval for rates it considers high enough. Backers say the bill would allow policyholders to keep their familiar insurance company, rather than being forced to switch and that some people would rather keep a wellcapitalized insurer they know and pay a little more for it, than change insurance companies. Critics say the measure would allow insurance companies to, in essence, cancel policies by raising rates to unacceptable levels. The House passed the measure by a vote. The Senate followed suit with a 27-9 vote. The bill s success took many by surprise. Introducing the bill at its first House committee stop, Rep. Bill Proctor, R-St. Augustine, referred to it as a vehicle for discussion. He wasn t the only one who sold the bill short. I never thought I d see a session where we would see any deregulated sector of the insurance industry, said Scott Johnson, FAIA lobbyist. But the measure has flaws, the biggest of which may be that it s targeting the wrong insurers, Grady said. Many of the state s largest private insurers, including State Farm, aren t necessarily the companies that would benefit from premium flexibility. State Farm, for example, has announced its intention to close out its book of business in Florida over the next 10 years. It is very discriminatory, Grady said. It does not reach the folks who we expect to write more insurance. --END-- 05/14/09 Independent and Indispensable Pensacola News Journal Critics: Crist crippled insurance industry By Stephen D. Price

20 News Journal Capital Bureau TALLAHASSEE -- Florida property owners may have to brace for more than just high winds this coming hurricane season. Insurance advocates warn that the state lacks the financial backing if a hurricane the size of Katrina were to hit Florida, and could result in nonpayment of claims. "In our state government's pursuit of artificially low rates Florida has in essence created a fragile system of insurance that leaves Florida homeowners and tax payers at great financial risk," said Jeff Grady, president of Florida Association of Insurance Agents, in a press conference Thursday. Gov. Charlie Crist has championed lower insurance rates and vilified big insurance. State regulators denied State Farm Florida an average 47-percent rate increase and the company is pulling out of the Florida property-insurance market. Grady said about 40 percent of insurance carriers in Florida posted a net loss in 2008, a year without a hurricane landfall in the state. "This is an indication to us that artificially suppressed rates are keeping some of these companies from being able to price the wind risk adequately," Grady said. Some were lukewarm to a bill that passed the recent legislative session that attempts to deregulate property insurance in Florida. The bill (SB 2036) authorizes certain insurance carriers to use a rate in excess of applicable filed rate. "It deregulates a few select insurance companies who may qualify but it does so at the expense of other carriers who don't," said Scott Johnson, vice president of FAIA. "The ones it does deregulate are the largest." Walter Dartland, executive director of the Consumer Federation of the Southeast, said consumers face a serious dilemma. "Either pay now, or pay later," Dartland said. "We just can't afford as consumers to turn our backs on the market.... Paying more for insurance now is probably better than having worthless or no insurance at all. Sarasota Herald Tribune Insurance agents bemoan new legislation INSURANCE: They want an even playing field in Florida for all insurers

21 1/NEWSSITEMAP By John Hielscher Published: Friday, May 15, 2009 at 1:00 a.m. Last Modified: Thursday, May 14, 2009 at 6:44 p.m. Florida lawmakers created an "uneven playing field" in new legislation that benefits big property insurance companies over smaller ones, an insurance agents group said Thursday. By capping at 10 percent a rate increase at state-run Citizens Property Insurance Corp., the Florida Legislature also extended the time that its prices will be artificially low, said officials from the Florida Association of Insurance Agents. With hurricane season starting June 1, Florida remains "one storm away from disaster," FAIA president Jeff Grady warned. "In pursuit of artificially low rates, Florida has created a fragile, unstable insurance market that leaves Florida homeowners and taxpayers in grave financial risk," he said. In a media briefing, Grady said the Florida Hurricane Catastrophe Fund, which provides backup insurance for companies, faces up to a $12 billion shortfall. That could mean delays or even non-payment of hurricane claims for homeowners and business owners, he said. Lawmakers in the recent session passed a bill, yet to be signed by Gov. Charlie Crist, that would allow the state's biggest homeowners insurers to charge any rate they wanted. State Sen. Mike Bennett, R-Bradenton, was a sponsor. Smaller companies, those with less than $500 million in surplus, would remain regulated by the Florida Office of Insurance Regulation. "The ones it deregulates are the largest, those with the greatest surpluses and greatest ability already to pay claims," said Scott Johnson, the agent group's vice president. An FAIA study found nearly 40 percent of the state's residential property insurers lost money last year, even without any windstorm losses. While the agents say that shows the need for companies to charge higher rates, they conceded that much of those losses came from the investment market. The agents enlisted consumer advocate Walter Dartland of the Consumer Federation of the Southeast to help make their case for unregulated insurance rates.

22 "Paying more for insurance now is probably better than having worthless or no insurance at all," he said. Crist, who pushed in 2007 to roll back insurance rates, has not said if he will sign or veto the bill that deregulates the insurers. He intends to sign the bill that raises Citizens rates. South Florida Business Journal Battle over homeowner insurance heats up d=lfn Business News - Local News Thursday, May 14, 2009 South Florida Business Journal - by Oscar Pedro Musibay It s two weeks before the hurricane season and the battle over homeowners insurance is heating up. During a conference call on Wednesday, Florida s insurance industry advocates called efforts to increase Citizens Property Insurance Corp. rates and allow large insurers to offer unregulated rates a step in the right direction. But, they argue, it s still not enough to counter the state s continuing exposure to hurricane risk. The Florida Association of Insurance Agents and the Consumer Federation of the Southeast said the state is playing Russian roulette by continuing to keep homeowners wind coverage rates artificially low. The only thing worse than expensive insurance is worthless insurance, said Walt Dartland, executive director of the Consumer Federation of the Southeast. The Florida House and Senate passed separate bills that would impact both Citizens and the Florida Hurricane Catastrophe Fund (FHCF), both of which are greatly underfunded. If Gov. Charlie Crist signs the Citizens bill, the state-run insurance company will be able to raise rates by as much as 10 percent a year until rates are actuarially sound. It also can increase rates by 1 percent a year to help shore up the FHCF, which sells reinsurance to the private market. As for the catastrophe fund, the state has to reduce coverage by $2 billion over six years in some areas, and offer smaller companies more coverage.

23 Crist has said that he supports the gradual increase on Citizen rates, a step the Florida Office of Insurance Regulation also supports. But, Jeff Grady, president and CEO of the Florida Association of Insurance Agents, pressed for the market to set insurance rates. New Jersey and Massachusetts tried unsuccessfully to artificially force down auto insurance rates for decades, he said in a news release. Only when state leaders let market forces take hold did competitive choice return and rates began to drop. The Florida Legislature also passed a bill that would allow large insurers such as State Farm to sell policies at unregulated rates, as long as they make it clear they are unregulated. However, Grady and other industry executives expect Crist will veto that bill. All contents of this site American City Business Journals Inc. All rights reserved. Sun-Sentinel Insurance deregulation "deeply concerns" Gov. Crist html May 14, 2009 Gov. Charlie Crist says he hasn't made his mind up on whether to sign a property insurance deregulation bill that would essentially allow large insurers to charge as much as they want. Proponents of the bill say it could help draw large insurers -- with bigger claims-paying reserves -- back to hurricane-prone Florida. "I have my concerns about it," Crist said today at his annual hurricane conference in Fort Lauderdale. "To not have the Office of Insurance Regulation be able to regulate insurance rates deeply concerns me." The bill also concerns a range of advocacy groups, including those who represent consumers and even insurance industry groups. Florida Association of Insurance Agents President Jeff Grady told reporters today that deregulating part of the industry is a step in the right direction given his group's finding

24 that 40 percent of Florida s residential property insurers lost money last year even though there were no hurricanes. But Grady said the bill is discriminatory in that it gives large national companies an edge over many of the smaller, domestic companies. Insurers offering the less regulated policy must have at least $500 million in reserves or $200 million in reserves and a ratio of net premiums to surplus of 2 to 1 or lower. "If I'm not mistaken, large companies are leaving the state. Why would you punish the people who are trying to do the job?" William Stander, assistant vice president of the Property Casualty Insurers Association of America, told me recently. Tallahassee Democrat Insurance advocates say claims might not be paid if major hurricane hits Florida dvocates+say+claims+might+not+be+paid+if+major+hurricane+hits+florida May 15, 2009 Florida property owners may have to brace for more than just high winds this coming hurricane season. Insurance advocates warn that the state lacks the financial backing if a hurricane the size of Katrina were to hit Florida, and could result in nonpayment of claims. "In our state government s pursuit of artificially low rates Florida has in essence created a fragile system of insurance that leaves Florida homeowners and tax payers at great financial risk," said Jeff Grady, president of Florida Association of Insurance Agents, in a news conference Thursday. Gov. Charlie Crist has championed lower insurance rates and vilified big insurance. State regulators denied State Farm Florida an average 47-percent rate increase and is pulling out of the Florida property-insurance market. Grady said about 40 percent of insurance carriers in Florida posted a net loss in 2008, a year without a hurricane landfall in Florida. "This is an indication to us that artificially suppressed rates are keeping some of these companies from being able to price the wind risk adequately," Grady said. Some were lukewarm to a bill that passed the recent legislative session that attempts to deregulate property insurance in Florida. The bill (SB 2036) authorizes certain insurance carriers to use a rate in excess of applicable filed rate.