Hi Jason - I operate a customer-owned insurance exchange in Florida. There is some merit to the notion of reducing the deductible for the FHCF. The FHCF was relatively flush, starting the year with >$10B of surplus, and it would reduce expenses for insurance companies which could then be required to be passed on to consumers. The lower layers of the reinsurance programs - the ones with the smallest deductibles that are most likely to get hit - were very very expensive this year. The state did something along those lines with the RAP layer, which made additional reinsurance limit available below the deductible of the FHCF. The RAP program, however, is very small relative to the overall FHCF.
One big issue with extending coverage below the current FHCF limits is that it exposes the state to a lot more risk. Even now, the FHCF will have a big loss, if Irma hit again this year the FHCF estimates it would have cost it $7.8M. Ian is significantly larger than Irma, so it's entirely possible that, even without the change that you are advocating for, the FHCF will exhaust its' surplus this year because of Hurricane Ian. If they had lowered the retention by another $3.5B that would almost certainly move FHCF surplus to zero.
The FHCF is a pretty key component of the reinsurance strategy for most companies writing in Florida, and without it, rates will be much higher, especially now that interest rates are high and raising more money is difficult for insurance and reinsurance companies. If it's insolvent or it's credit is impaired, it will have a big impact the solvency of all the insurance companies that buy reinsurance from it (every company in Florida).
In retrospect the lawmakers in Florida look wise for not following the course set in this article.
A real fix is to eliminate one way attorneys fees, which are inflating premiums in Florida by about 2x. Florida is about 8% of homeowners claims in a given year and about 80% of homeowners insurance lawsuits. Other states that have significant hurricane exposure - Texas, Louisiana, South Carolina, etc. have lower rates, largely because they have avoided the massive litigation abuse where customers sue insurance companies to get new roofs when they are simply worn out, not when they were impacted by a catastrophic storm. Very little of the money that gets paid by insurance companies into those scams ends up with the consumer, it mostly gets captured by the attorneys, public adjusters and roofer who are initiating that fraud.
Interesting article, but written by someone with very little knowledge about how the insurance and reinsurance works particularly as it relates to the very unique Florida market place. I have been in the reinsurance industry for over 45 years ( specializing in Florida for 30+ years). The Florida insurance market is unique in a number ways, there are solutions, but there are no experts employed by the state in reinsurance that can put them on the right track…..and asking a reinsurer or reinsurance broker who have vested interests in certain outcomes is not the answer
The purpose of the write up seems to give a broader view on the subject. It's up to you, me and others that read this article to contact your state representative to let them know there is a real solution for everyone. Lowering rates, have full coverage and low deductible is what people need. Do you think raising rates and offering a higher deductible or Actual Cash Value policy's are affordable? Would you want to pay 5k, 10k or even 15k to have your home repaired by a storm? The cat fund sounds like something that will release 99% of all Florida's insurance companies from a bad market to great market. Crist sounds like he's on to something with the Faith act. We have to make sure the Florida Chamber of Commerce does not get decided by 1 or 2 of these big insurance companies. Having an insurance company drive the government is outrageous and should not be allowed.
YOU SHOULD WANT TO SHARE THIS ARTICLE OR YOUR THOUGHTS TO EVERY FLORIDA HOUSE AND SENATE MEMBER. SEND AN EMAIL AND EVEN CALL!
Hi Jason - I operate a customer-owned insurance exchange in Florida. There is some merit to the notion of reducing the deductible for the FHCF. The FHCF was relatively flush, starting the year with >$10B of surplus, and it would reduce expenses for insurance companies which could then be required to be passed on to consumers. The lower layers of the reinsurance programs - the ones with the smallest deductibles that are most likely to get hit - were very very expensive this year. The state did something along those lines with the RAP layer, which made additional reinsurance limit available below the deductible of the FHCF. The RAP program, however, is very small relative to the overall FHCF.
One big issue with extending coverage below the current FHCF limits is that it exposes the state to a lot more risk. Even now, the FHCF will have a big loss, if Irma hit again this year the FHCF estimates it would have cost it $7.8M. Ian is significantly larger than Irma, so it's entirely possible that, even without the change that you are advocating for, the FHCF will exhaust its' surplus this year because of Hurricane Ian. If they had lowered the retention by another $3.5B that would almost certainly move FHCF surplus to zero.
The FHCF is a pretty key component of the reinsurance strategy for most companies writing in Florida, and without it, rates will be much higher, especially now that interest rates are high and raising more money is difficult for insurance and reinsurance companies. If it's insolvent or it's credit is impaired, it will have a big impact the solvency of all the insurance companies that buy reinsurance from it (every company in Florida).
In retrospect the lawmakers in Florida look wise for not following the course set in this article.
A real fix is to eliminate one way attorneys fees, which are inflating premiums in Florida by about 2x. Florida is about 8% of homeowners claims in a given year and about 80% of homeowners insurance lawsuits. Other states that have significant hurricane exposure - Texas, Louisiana, South Carolina, etc. have lower rates, largely because they have avoided the massive litigation abuse where customers sue insurance companies to get new roofs when they are simply worn out, not when they were impacted by a catastrophic storm. Very little of the money that gets paid by insurance companies into those scams ends up with the consumer, it mostly gets captured by the attorneys, public adjusters and roofer who are initiating that fraud.
Interesting article, but written by someone with very little knowledge about how the insurance and reinsurance works particularly as it relates to the very unique Florida market place. I have been in the reinsurance industry for over 45 years ( specializing in Florida for 30+ years). The Florida insurance market is unique in a number ways, there are solutions, but there are no experts employed by the state in reinsurance that can put them on the right track…..and asking a reinsurer or reinsurance broker who have vested interests in certain outcomes is not the answer
The purpose of the write up seems to give a broader view on the subject. It's up to you, me and others that read this article to contact your state representative to let them know there is a real solution for everyone. Lowering rates, have full coverage and low deductible is what people need. Do you think raising rates and offering a higher deductible or Actual Cash Value policy's are affordable? Would you want to pay 5k, 10k or even 15k to have your home repaired by a storm? The cat fund sounds like something that will release 99% of all Florida's insurance companies from a bad market to great market. Crist sounds like he's on to something with the Faith act. We have to make sure the Florida Chamber of Commerce does not get decided by 1 or 2 of these big insurance companies. Having an insurance company drive the government is outrageous and should not be allowed.
YOU SHOULD WANT TO SHARE THIS ARTICLE OR YOUR THOUGHTS TO EVERY FLORIDA HOUSE AND SENATE MEMBER. SEND AN EMAIL AND EVEN CALL!
There's no ask here... What's the purpose of the write up???