InsuranceNewsNet.com
by Diana Rosenberg
June 1, 2011
As property owners and insurers await the June 1 start of hurricane season, a new law designed to address noncatastrophe cost drivers is a good incremental step to restoring the health of the property-insurance market in Florida, but “certainly more work is needed,” said American Strategic Insurance President and Chief Executive Officer John Auer.
The legislation, signed into law by Gov. Rick Scott earlier this month (BestWeek, May 18, 2011) raises the minimum surplus requirements for residential property insurers; shortens the time frame for filing windstorm and hurricane claims to three years and sinkhole loss claims to two years; provides a more precise definition of a sinkhole; places limits on public adjuster compensation; and restores the replacement-cost holdback provision for dwelling coverage, among other reforms.
“Overall I think the bill addresses a lot of very important areas,” Auer said. “There certainly are other things that can be dealt with too, probably most importantly Citizens Property Insurance Corp. He called the lawmakers’ failure to pass a bill designed to shrink Citizens (BestWire, May 12, 2011) and allow the state-run insurer to raise rates above its current 10% cap “unfortunate.”
“As we sit currently, far too much risk is being borne by the taxpayers of Florida, through a combination of both Citizens and the Florida Hurricane Catastrophe Fund,” Auer said. “For years Florida has been only one major hurricane away from fiscal crisis. The current system requires all Floridians to pay hurricane taxes to subsidize million dollar beach homes on Florida’s coast.”
Auer wants Citizens, which has ballooned to become the state’s largest insurer by market share, returned to its original mandate of insurer of last resort.
As for the new hurricane-modeling software from Risk Management Solutions Inc., Auer said he is “pretty frustrated with the magnitude of the change.”
RMS released a more sophisticated version of its model in February (BestWire, Feb. 28, 2011) which incorporates greater risk for inland areas and increases the probable maximum loss for some carriers. In a May 16 Special Report on the U.S. property/casualty industry, A.M. Best analysts said that the release of RMS version 11, along with first-quarter catastrophe losses sustained by global reinsurers, could result in primary insurers facing higher reinsurance costs at the upcoming July 1 renewals.
Auer acknowledged ASI will need to make adjustments because of the new model.
“We’re purchasing more limit,” Auer said. “We end up paying more for the various layers that we do buy, so both of those changes will necessarily lead to rate increases. They also affect our optimum spread of business, which will affect where we want to write business and how much rate we have to charge in various areas.”
St. Petersburg-based ASI, which currently has about 300,000 policies in Florida, continues to expand beyond the Sunshine State. It now writes in 14 states, including Texas, Louisiana and South Carolina, as well as Washington, D.C. The company is licensed in 24 states, and is in the process of applying for licenses in an additional four states.
The American Strategic Insurance Group currently has a Best’s Financial Strength Rating of A- (Excellent).
The companies with the largest market share in the Florida homeowners’ multiperil market in 2010 were: Citizens Property Insurance Corp., with a 16.7% market share; State Farm Group, with 14.15%; Universal Insurance Holdings Group, with 8.71%; USAA Group, with 5.06%; and St. Johns Insurance Co. Inc., with 3.58%, according to BestLink, which provides online access to A.M. Best’s database of insurance information. ASI Group has a 3.12% market share in Florida, according to BestLink.
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