Florida insurance ‘fix’ is only a lead-in to the next ‘crisis’

This story from Tom Zucco of the St. Petersburg Times says pretty much what I expected to hear a couple months after the Florida legislature passed an insurance package designed to stabilize the market and lower premiums. What’s the story say? It ain’t happening.  It’s a great story, read the whole thing, and watch for that eye-popping total on the exposure of Citizens Property, the state-run insurer.  Oh, what the heck, I’m just going to tell you: $432 billion. 

3 Comments

Filed under First Party Insurance

3 Responses to Florida insurance ‘fix’ is only a lead-in to the next ‘crisis’

  1. Seth Chandler

    For recent intelligent commentary on this issue, see my blog entry at The Conglomerate (http://www.theconglomerate.org/2007/03/when_i_was_a_th.html)

  2. Layne

    This is astounding. You have to love the Florida Insurance Commisioner’s comment:
    A.M. Best “has been wrong for the last 12 years, and I’m very concerned about that.”
    A.M. Best wrong for 12 years? O.K.
    Also, if my math is right, Citizens is only collecting $2.4B a year in revenue, but has $432B in exposure. This means that their annual revenue is .56% of their exposure.
    I’m no actuary, but collection .56% of exposure is ludicrous in this hurricane-prone environment, especially when they have virtually no reserves. In other words, current claims are being paid out of current premium/revenue.
    Good thing for Florida that A.M. Best doesn’t get to rate Citizens . . .they might be wrong about Citizens also. This is a disaster waiting to happen, and I’m afraid that the rest of the country will be called on to fix it when it happens.

  3. Layne, it likely will only get worse for Citizens’ exposure. As the story says, it doubled in the last year. The problem with this is Citizens is under the control of the Legislature, and they can both make it sell insurance and forbid it to raise rates, which in essence they have done. Private insurers can react to the anti-cherry picking law by just dumping the more risky policies en masse, which they are doing. So while the state can make them sell homeowners insurance, the state can’t tell them which risks they have to insure, or at least that hasn’t happened yet.