InsuranceNewsNet.com
by Diana Rosenberg
June 6, 2011
With hurricane season under way, the property insurance market in Florida is as unstable as it was in the wake of Hurricane Andrew in 1992, said Robert Ritchie, president and chief executive officer of American Integrity Insurance Group.
“The reason that I feel we’re at this point is because we have allowed the rate adequacy to languish. We have allowed for certain competitors to initially write business at insufficient rates,” Ritchie said. “So the ability for the private market, even those of us that are domestic and committed to Florida, is very fragile.”
Ritchie also pointed to noncatastrophe cost drivers, including sinkhole claims and a 2007 law requiring insurers to make full replacement cost coverage up front, which insurers have long said leads them to pay for repairs that are often never made or contents that are never replaced, with the insurance proceeds going for things such as paying down mortgages.
Legislation signed by Gov. Rick Scott last month restores mandatory hold-back language for dwellings, but not contents (BestWire, May 18, 2011). The new law also 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; and places limits on public adjuster compensation.
“While it’s a noble start, it is woefully inadequate,” Ritchie said of the new law. “At the end of the day, we were out lobbied by the trial bar, by public adjusters, and by many people that have created a cottage industry that have created a hidden tax for the rest of Floridians because rate increases, even without a hurricane, will continue.”
Florida needs to take some “tough medicine” to restore the health of the property market, and a key part of that is restoring Citizens Property Insurance Corp. to its original mandate of insurer of last resort, Ritchie said.
“I personally believe that Citizens will reach two million households or policies before any real reform is tackled,” Ritchie said.
Citizens’ policyholder count has continued to swell and it is now the state’s largest insurer by market share. As of April 30, Citizens had some 1.3 million policies in force. In the recently concluded legislative session, lawmakers failed to approve legislation that sought to shrink Citizens by allowing the company to increase residential policyholders’ rates by up to 25% and restricting high-value homeowners from purchasing insurance from the state-run insurer (BestWire, March 9, 2011).
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.
American Integrity, based in Tampa, has a 1.02% market share in Florida, according to BestLink.
To hear the entire interview with Ritchie, visit http://www.ambest.com/media/media.asp?RC=187727.
http://insurancenewsnet.com/article.aspx?id=264049&type=newswires
