TALLAHASSEE, Fla. – Oct. 30, 2013 – Florida Chief Financial Officer Jeff Atwater on Tuesday continued to seek answers from the state’s insurance commissioner. Atwater wants to know why Florida property owners’ property-insurance premiums haven’t come down if companies’ costs dropped through lower reinsurance costs.
As the end of another hurricane season approaches without a storm making a direct hit on Florida, Atwater wants Insurance Commissioner Kevin McCarty to provide an analysis that outlines how much insurers are saving on reinsurance, how they use the savings and how customers benefit.
And Atwater wants the Office of Insurance Regulation to compete the analysis by Dec. 18.
“Year after year, insurance companies have been telling their customers and the Legislature that the ‘simple’ explanation for higher rates they are charging was due to reinsurance costs going up,” Atwater wrote. “But now that insurance companies are experiencing a significant decrease in the cost of reinsurance, they are not lowering rates for consumers.”
Reinsurance is backup insurance for insurance companies.
The Dec. 18 deadline gives McCarty’s office time to do a thorough analysis, yet complete the work “in a timely manner,” according to Atwater’s spokesman, Chris Cate.
McCarty said Tuesday that “such an analysis is already underway.” He expressed confidence that the study will be completed by the deadline.
Atwater’s request comes two weeks after Jack Nicholson, executive director of the Florida Hurricane Catastrophe Fund, said the state-created fund – basically a public pool that provides insurance for insurance companies, or reinsurance – has built its largest cash reserve ever at nearly $10 billion.
Atwater says that Florida law allows insurers to purchase enough reinsurance to cover a 1-in-250 year-storm, but “rarely if ever” is such coverage purchased.
“If companies historically did not believe they needed more reinsurance, and your office was not mandating that they acquire more reinsurance, then please tell me how they are now deploying the savings they are receiving from lower reinsurance costs,” Atwater wrote. “My question to you is simple: ‘Why have rates not come down?’”
In August, Atwater asked McCarty to explain why property insurers hadn’t reduced premiums at a time when reinsurance costs had dropped worldwide on average 15 percent to 20 percent. McCarty said then that insurance companies might be increasing the amount of reinsurance they purchase rather than reducing rates; or not enough time may have passed for the savings to trickle down to consumers in the form of lower premiums. He also said that reinsurance accounts for only a portion of a rate filing; that some companies have tried to spread out of the reinsurance cost over a number of years to lessen one-time hikes; and that not every company is seeing a savings from lower reinsurance rates.
McCarty said that some insurers have indicated an intention to reduce rates in some insurance territories based on the 2013 reinsurance costs.
There were 45 insurance-company rate change filings between July 1 and Oct. 17. Of those, 25 requested increases on residential policies, seven planned to keep rates stable and 13 requested reductions.
Homeowners covered by Citizens Property Insurance Corp., the Florida-owner insurer of last resort, will see an average rate increase of 6.3 percent next year, down from a 7.9 percent hike requested on the combined personal-lines and coastal accounts. Citizens had 1.2 million policies as of Sept. 30.
Among rate-filing decreases approved since July by OIR, the largest has been a 7.8 percent reduction by the ACA Home Insurance Corp. ACA handles 88,305 residential premiums.
Universal Property & Casualty Insurance Co., with 507,378 residential policies, has asked for a 2.3 percent decrease. Security First Insurance Co., with 106,572 residential policies, is seeking an 8.8 percent drop.
Source: News Service of Florida, Jim Turner