Florida’s top financial officer said Tuesday that creating and publicizing a “stress test” will help instill public confidence in the smaller insurers that have come to dominate Florida’s property insurance market.
Creating a stress test to check the health of insurers and making those results public would give property owners the confidence that the smaller companies are well-managed and will deliver when the next major hurricane hits the state, said Jeff Atwater, Florida’s chief financial officer.
In the past decade, Florida’s homeowners’ market has come to be dominated by smaller insurers, as well as a state government-created outfit, that have filled the vacuum left by the nation’s largest insurance companies when the large insurers decided to limit policies in Florida following two years of major hurricanes in 2004 and 2005. The large, name-brand insurance companies once had 40 percent of Florida’s market but now only represent about 17 percent of the market. The smaller, “Florida domestic” companies now have 70 percent of the property market, and “they may not be the familiar names,” Atwater said at a conference sponsored by the Florida Chamber of Commerce at Walt Disney World.
“There’s a question that keeps getting asked: ‘Are these players, players that will be here after the big one comes?’ ” Atwater said. “In fact, these companies are sound.”
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The stress test can show the process through which the smaller insurers have gone through to prove their financial soundness, Atwater said.
Atwater also said consumers are ready for rates to come down. The chief financial officer said he had asked Florida Insurance Commissioner Kevin McCarty to report to him if this is the year when Florida’s rates, among the highest in the nation, will come down given that the state hasn’t had a hurricane strike in years, the insurance market is more competitive than it has been in a while and reinsurance costs are down. If not, Atwater said, he wants an explanation of what it’s going to take to bring down rates since changes made by the Legislature two years ago were supposed to help lower rates.
“The wait is over,” Atwater said. “The consumer has grown tired. If the changes that were put in place two years ago can’t achieve the savings the Legislature expected, something has got to change.”
McCarty said Florida’s insurance market is in the best shape it has been in a while. He said his goal is to pass on reductions in the cost of reinsurance as savings to homeowners.
“Our insurance industry is operating on all cylinders,” he said.
Nowhere is the improvement in Florida’s property market more evident, McCarty said, than at Citizens Property Insurance Corp., the Florida Legislature-created outfit that provides insurance to property owners who can’t purchase it from private companies. Citizens has gone from almost 1.5 million policyholders three years ago to the current 600,000 policies. Policyholders have gone to private companies.
“This turnabout is nothing short of remarkable,” McCarty said.
McCarty refused to talk to reporters after his speech and instead met privately with a Holland & Knight policy adviser who does lobbying. But Gov. Rick Scott’s office confirmed this week that he is trying to recruit a Louisiana insurance official to replace McCarty. Attendees at the conference gave McCarty a standing ovation as he took the stage, and Atwater singled him out for praise before his speech. McCarty has been insurance commissioner since 2003.