Don Brown

A.M. Best
Editorial
October 10, 2011

A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of B (Fair) and issuer credit rating (ICR) of “bb” of Safe Harbor Insurance Company (Safe Harbor) (Tallahassee, FL).

The revised outlook reflects Safe Harbor’s reduced risk-adjusted capitalization resulting from double-digit premium and exposure growth, as well as its increased reliance on the Florida Hurricane Catastrophe Fund as part of its current year reinsurance program.

Additionally, Safe Harbor’s ratings are based on its geographic concentration of risk, which subjects it to a single state’s judicial and regulatory actions, while exposing the company’s property risks to hurricane events since it is a Florida-only writer of homeowner and mobile home business.

These negative rating factors are offset by Safe Harbor’s favorable operating performance since inception and its ongoing strategic position within RM Ocean Harbor Holding Inc., whose lead insurance company is Ocean Harbor Casualty Insurance Company within the Ocean Harbor Insurance Group (OHIG). Currently, OHIG’s FSR of B+ (Good) and ICR of “bbb-“are under review with negative implications following its announced acquisition of GNW Acquisition Corp.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology – Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Rating Members of Insurance Groups”; and “A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.

http://www3.ambest.com/Frames/Frameserver.asp?site=press&Tab=1&altsrc=2&RefNum=65494655775346556654

PropertyCasualty360.com
By Joan E. Collier
October 2011

John Lennon would be proud. His 1970s anthem “Power to the People” is alive and well in Florida. The scene at the Citizens Property Insurance Corp. public rate hearing in Tampa last month was missing the flickering lighters, but the voices were loud and clear: The proposed rate hikes for sinkhole coverage would not stand.

Insurance Commissioner Kevin McCarty got the message. Less than a week later, he chopped the triple-digit rate increase proposal to low double-digits.

On the heels of McCarty’s decision come renewed fears that another state-created insurance entity has significant financial troubles. Florida’s Hurricane Catastrophe Fund (Cat Fund) is—in the words of its leader and some lawmakers—“dangerously overexposed.”

Although the troubles of the Cat Fund lack the pathos of sinking homes and skyrocketing rates (and frankly, reinsurance is simply much more difficult for the consumer to understand), we should nonetheless prepare ourselves for another chorus of outrage from various quarters.

The Cat Fund was created during a special legislative session in November 1993 as a response to the $30 billion in losses generated by Hurricane Andrew. It was intended as a backstop to both private insurers and Citizens. The fund is financed by three sources: reimbursement premiums charged to participating insurers, investment earnings on the fund, and emergency assessments on property & casualty insurers.

During a presentation by COO Jack Nicholson to the Senate Banking and Insurance Subcommittee last month, Nicholson reported that in 2000 the Cat Fund “had about a trillion in exposure and today we have about $2 trillion.” He further noted that this year the fund is providing $18.5 billion worth of coverage.

In a question-and-answer session, Nicholson agreed with panel members that, “considering the current reality of the marketplace,” the Cat Fund is “dangerously overexposed.”

“The problem is the volatility in the financial markets,” Nicholson said. “We also can collect assessments (or a hurricane tax), if necessary, to fund the operations of the Cat Fund. This is something that private reinsurance cannot do but we can, and we need to do it judiciously. We should not plan on bonding for issues that we are not certain we can deliver.”

According to information posted on its website, the Cat Fund issued bonds in the amount of $1.35 billion in 2006 and $625 million in 2008. These are currently being financed by a 1-percent assessment on premiums for most property & casualty and surplus lines policies renewed after Jan. 1, 2007. The fund issued bonds in the amount of $675.92 million in 2010. The assessment percentage of 1 percent was increased to 1.3 percent on the assessable lines of business effective on all policies written or renewed on or after Jan. 1, 2011.

Nicholson reminded legislators that the fund’s “original purpose was to help maintain a viable insurance market … not to replace reinsurance. The Cat Fund needs to be right-sized.” His proposals to accomplish that include reducing the size of the government-run reinsurer’s mandatory layer, increasing the participating insurers’ co-pay, reducing special taxes the fund might impose on Floridians, and terminating the temporary increase in coverage layer.

The problem with “right-sizing”—at least in the minds of many legislators and consumers—is that scaling back the size of the Cat Fund likely will result in higher reinsurance costs and ultimately higher insurance premiums. Nicholson told the committee, “We save the state $2 billion a year with the existence of the Cat Fund. Rates are 25 percent lower than they would be without the Cat Fund. “

Get ready for the second verse.

http://www.propertycasualty360.com/2011/09/29/after-citizens-versus-citizens-is-another-protest

Insurance Journal
By Michael Adams
October 6, 2011

With four months to go before Florida’s legislative session, lawmakers are already considering the future of the state’s largest homeowners’ insurer. However, there are few easy answers in sight.

Citizens Property and Casualty Insurance Corp. Chief Financial Officer Sharon Binnun painted a picture of an insurer that continues to dominate the market. The insurer now covers 1.4 million state residents, representing more than 20 percent of Florida’s market.

“We are growing by a 1,000 policies a day, sometimes even more,” said Binnun at a Senate committee hearing.

Binnun said the majority of that growth is coming in the insurer’s personal lines account, which now represents 946,000 homeowners. By comparison, just two years ago, there were 607,000 policyholders in that account. The insurer’s coastal account currently has around 440,000 policyholders, with the remaining policies in the commercial account.

She said the reasons for that growth include that the insurer’s rates remain competitive or lower than the private market, many agents do not have another market, and Citizens’ underwriting is less stringent than that of many private companies.

That could change, she said, but not without some significant action by lawmakers and regulators. “You don’t have to recreate the wheel,” she said. “But it is difficult to make difficult choices.”

Senator Don Gaetz (R-Destin) said that the insurer is undermining the entire market given its current regulatory scheme. He said this represents a significant burden on Florida residents, many of whom are not even aware of the possible financial repercussions.

“When is it time to go back to being an insurer of last resort as opposed to being a malignant force that sucks up a 1,000 unsuspecting customers a day,” he questioned.

Binnun did say there are some reforms that could help stem the tide of policies flowing into Citizens. Namely, a bill considered by lawmakers earlier this year that, among other things, would have allowed the insurer to increase its rates beyond the current 10 percent annual cap.

That bill, however, proved to be a political non-starter and the bill’s sponsor indicated he would likely not introduce it next year.

“We have a legislative duty to the citizens of Florida to pass that bill,” said Senator Alan Hays (R-Deland). “But at the same time unless there is a significant appetite among my colleagues, I’m not going to beat my head against the wall.”

Florida’s property market has undergone a significant change in the last half dozen years. For example, in 2004, national companies represented 28 percent of the state’s market and their Florida only “pup” companies, 35 percent. Now, those national companies only represent 19 percent of the market and the pup companies 16 percent. The state is largely dependent upon Citizens and Florida domestic insurers that now represent 44 percent of the market.

Senator Mike Fasano (R-New Port Richey), who recently led the fight against Citizens proposed triple-digit increase in sinkhole rates, questioned why private companies have not returned to those sinkhole-prone areas even though an overwhelming number of residents have opted not to buy the coverage.

Binnun said there were several issues when it comes to private companies re-entering the market in those sinkhole prone areas. While being optimistic about the sinkhole provisions in this year’s property bill, she said that many companies might see Citizens as a test case to see how well those reforms actually work.

She added that the almost annual attempts by the legislature to reform the market also have an effect. “If you guarantee private companies they don’t have to write sinkhole coverage, they ask ‘for how long, and will that change next year.’”

One thing about Citizens size is that it does give it more capacity to pay claims in the event of a hurricane. The insurer has a total surplus of $5.7 billion, that along with $6.6 billion in coverage from the Florida Hurricane Catastrophe Fund, private reinsurance, and pre-event bonding gives it a total claims paying capacity of $16.7 billion.

In the event Citizens exhausts those monies, it could also levy a variety of assessments on Citizens’ policyholders and statewide on all lines of property and casualty insurance with the exception of workers’ compensation and medical malpractice.

Binnun said that given the insurer’s resources, it could withstand several storms before it needed to access funds from elsewhere.

“We are so big now it would take a lot of losses to even have to access the Cat Fund,” she said.

http://www.insurancejournal.com/news/southeast/2011/10/06/218896.htm

Florida-Based Property Insurers CEO Group
Editorial
October 5, 2011

Citizens Property Insurance Corporation would assess private insurers to make up the deficit if unable to get full reimbursement from the Florida Hurricane Catastrophe Fund. “We would be assessing more quickly…That’s what we would have to do,” Citizens Chief Financial Officer Sharon Binnun told the Senate Banking & Insurance Committee Tuesday.

Sen. Alan Hays, R-Umatilla, noted that Cat Fund Chief Operating Officer Jack Nicholson stated to the committee last month the plan is dangerously over-exposed in light of the country’s economic crisis. If a storm or series of storms is bad enough and the more than $18 billion in coverage is triggered, the Cat Fund might be unable to sell more than $11 billion in bonds it would need. Granted, this is an unlikely scenario, but Citizens and private insurers would get pro rata shares of what the Cat Fund could not pay as reimbursements.

Citizens has included $6.6 billion in Cat Fund reimbursements as part of its 2011 financing plan. What happens if the Cat Fund cannot deliver all of that, Hays asked Ms. Binnun. Citizens would cover the deficit by moving to assessments, she said, so assessments would be triggered by a smaller storm event.

Can Citizens consider the negative impact of assessments on insurers who would have their own hurricane claims to pay and might also not get full recovery from the Cat Fund? Hays asked.

The statute requires that Citizens impose the assessments. If there are insolvencies, surviving insurers would be required to pay more, their pro-rata share of the deficit.

Florida-Based Property Insurers CEO Group
Editorial
October 5, 2011

Leaders of the Senate Banking and Insurance Committee Tuesday said they want to take another look at unsuccessful legislation from the 2011 session to shrink Citizens Property Insurance Corporation, now growing by 1,000 policies a day. Banking & Insurance Chair Garrett Richter, R-Naples, Senate President-Designate Don Gaetz, R-Destin, and Sen. Alan Hays, R-Umatilla, expressed their intent to work on a proposal.

Hays offered a bill last session, which didn’t pass, dramatically increasing Citizen’s rates and tightening eligibility requirements. It was opposed by southeast Florida legislators whose constituents would have faced major rate increases.

Rep. Jim Boyd, R-Bradenton, filed a Citizens bill (HB 245) earlier this week, allowing surplus lines carriers to submit Citizens depopulation proposals to the Office of Insurance Regulation, in addition to admitted insurers. What other depopulation proposals might come up in the House is not yet clear.

Sharon Binnun, Citizens Chief Financial Officer, told the Banking & Insurance Committee Citizens is growing by 1,000 policies a day, mainly in the Personal Lines Account, and should reach 1.6 million policies by the end of this year. Following that, Richter, Gaetz, and Hays agreed reducing citizens should be tackled again during the 2012 session.

Citizens’ policy count has increased 67 percent since December, 2009, “and we are not advertising,” Ms. Binnun said. The significant growth is limited to the statewide, all perils, Personal Lines Account. The Coastal Account has remained steady at about 400,000 policies, many dating from the 1970’s and the old Florida Windstorm Underwriting Association.

The Citizens’ policy count was 1.46 million as of September 30. It is projected to be 1.6 million at the end of the year.

Why do so many policies continue to come to Citizens’ Personal Lines Account? One huge factor is “rate, rate and rate,” she said. The Citizens’ premium is likely lower than private market. Another factor is that some agents have no market which is accepting new risks other than citizens.

Still other factors she cited in her PowerPoint included:

• Citizens cannot become insolvent

• Less stringent underwriting requirements

• Geographic concentration in SE Florida and Sinkhole territories

• Wind Mitigation Credit factor

• Few private companies want to write Commercial Residential policies and/or Coastal properties
Citizens’ areas of the most significant concentration in the PLA include Dade, Broward and Palm Beach (42 percent) and Hillsborough, Pinellas, Pasco and Hernando (29 percent).

“This gives me a gross headache,” Hays said. “You are good people. You don’t wear black hats, but we have told you these are the parameters you will operate under.”

Hays raised one possible new legislative edict: requiring that all new policies in Citizens be charged actuarially sound rates and be exempt from the Citizens glide path. That probably would reduce the 1,000-policy-a-day growth rate, Ms. Binnun said.

Senate President-Designate Gaetz asked what the Legislature could do to return Citizens to the insurer of last resort. When his time in the Senate is up and he is packing up his papers “I would love to have a closed sign on a lot of Citizens business,” he said.

Richter said taking another look at making an offer of full sinkhole coverage optional instead of mandatory is probably the primary issue from the SB 408 deliberations which could be considered again during the 2012 session. He did express interest in looking at portions of the Citizens bill sponsored by Sen. Hays.

Ms. Binnun said keeping the rules of the game consistent is most important to attract private carriers. If the Legislature did make full sinkhole coverage optional, some carriers would wonder how long it would be before it was mandatory again.

An adequate rate which does not compete with the private market is very important, she said. Some time to allow the significant reforms from SB 408, passed during the 2011 session, to take effect also is important. Non-catastrophe losses in southeast Florida are growing at a dramatic rate and SB 408 provisions will attack this. Some private carriers will sit on the sidelines for a while, watching Citizens’ implementation of the reforms. Their attitude is, she said, “I want to see if this works for someone else.”

‘We don’t have to re-invent the wheel. A lot of good work has been done,’ she said. She specifically mentioned the Hays Citizens bill from 2011 (SB 1714) and recommendations from the Citizens Property Mission Review Task Force of a few years ago.

“I’m not going to beat my head against the wall again” for a strong Citizens depopulation package unless there is significant support in the Legislature, Hays said. He got quick responses from Chairman Richter and Gaetz that they would work with him in developing Citizens legislation for 2012.

Richter noted that Citizens is now the fourth largest property writer in the country, and it operates in a single state, while other giant writers operate in many states. “We have to do what we can to shrink this.”

“I would be happy to be a junior partner or take it on myself,” Gaetz said of development of a focused Citizens package. He was especially interested in the high error rate through the reinspection program uncovered in the $1 billion in annual mitigation discounts being granted by Citizens.

PropertyCasualty360.com
By Caroline McDonald
September 28, 2011

An added financial burden from natural disasters is being placed on U.S. taxpayers because of government intervention in the insurance market, according to a report released by Lloyd’s of London.

The report (Lloyds.com/usnatcatreport), “Managing the Escalating Risks of Natural Catastrophes in the United States,” calls for greater cooperation between government, insurers and planners in the U.S. to ensure that a greater emphasis is placed on managing and mitigating risk.

According to the report, the private natural catastrophe insurance market often is unable to function properly when, for public-policy reasons, government-run insurance programs or pools offer insurance that does not reflect the true price of the risk.

Lloyd’s says in the report that insurance is not sustainable if it is offered at rates below what is required by sound, risk-based actuarial practices.

When insurance is not risk-based, according to the report, the wrong price signals are sent and there is little or no incentive to mitigate risk. In turn, this leads to wider adverse impacts on society, such as ruin of vulnerable environments and a reliance on emergency funds to help rebuild communities after catastrophic events.

The problem is illustrated by the current fight over disaster aid for Hurricane Irene, Lloyd’s says. Lawmakers can’t agree on where the aid should come from and whether it should be offset by cuts to other federally funded programs.

Data from the Census Bureau shows that 35.7 million people were seriously threatened by Atlantic hurricanes in 2008, compared with 10.2 million in 1950, the study reports.

It adds that if there is a healthy private-insurance market, the government will be relieved of some of its financial exposure to natural disasters. This would enable it to focus assistance on the most needy in a more targeted and sustainable way.

By developing alternative strategies to tackle the costs of natural disasters—for example by promoting risk-mitigation initiatives—the government can work alongside insurers to encourage a better attitude to risk in society, Lloyd’s says.

“The private insurance market has a crucial role to play in helping communities and economies recover from disaster,” Sean McGovern, director, North America at Lloyd’s says in a statement. “We need to go back to first principles and redraw the boundaries between government intervention and the private market. The cost to the U.S. taxpayer is huge and is not sustainable.”

The issue has gained more urgency as catastrophic losses have mounted and the U.S. economy has declined, notes the report. In the 2011 first half alone, economic losses from natural catastrophes in the U.S. totaled $27 billion, according to the Insurance Information Institute. This year is on track to be one of the costliest on record for the insurance industry, Lloyd’s says in the report.

Lloyd’s points out that there is a need to develop a better understanding of the potential costs of natural disasters to those affected and to the wider economy.

Both the insurance industry and the government need to help individuals and communities understand the steps they can take to mitigate the potential consequences of catastrophes and adapt to the future impacts of climate change. This could significantly reduce the impact and costs of natural disasters.

http://www.propertycasualty360.com/2011/09/28/govt-intervention-in-natural-disaster-insurance-bu

Insurance Journal
Editorial
September 27, 2011

Government intervention in the insurance market is putting the financial burden of natural disasters on U.S. taxpayers, according to a report by Lloyd’s of London, the global specialist insurance market.

The report , which also says there are other ‘unintended impacts’ of government-run insurance programs, calls for greater cooperation between government and private insurers to address disaster mitigation and recovery.

“The private insurance market has a crucial role to play in helping communities and economies recover from disaster,” said Sean McGovern, director, North America at Lloyd’s. “We need to go back to first principles and redraw the boundaries between government intervention and the private market. The cost to the U.S. taxpayer is huge and is not sustainable.”

Lloyd’s, which ranks first among surplus lines insurers in the U.S. according to A.M. Best, says the issue has gained more urgency as catastrophic losses have mounted and the U.S. economy has declined. In the first half of 2011 alone, economic losses from natural catastrophes in the U.S. totaled $27 billion, according to the Insurance Information Institute. This year is on track to be one of the most costly on record for the insurance industry.

The Lloyd’s report, “Managing the Escalating Risks of Natural Catastrophes in the United States,” calls for greater cooperation between government, insurers and planners in the U.S. to ensure that a greater emphasis is placed on managing and mitigating risk. It sets out nine fundamental principles for managing natural catastrophe risk in the U.S.

The report says allowing a healthy private insurance market to price risk appropriately is important.

“Insurance is not sustainable if it is offered at rates below what is required by sound, risk-based actuarial practices,” said McGovern “When insurance is not risk-based, the wrong price signals are sent and there is little or no incentive to mitigate risk.”

McGovern said there needs to be a better understanding of the potential costs of natural disasters to those affected and to the wider economy and that both the insurance industry and the government need to help individuals and communities understand the steps they can take to mitigate the potential consequences of catastrophes and adapt to the future impacts of climate change. The report says this type of planning could significantly reduce the impact and costs of natural disasters.

“The extent of the challenge facing us is best highlighted by the unprecedented series of natural disasters that have occurred this year,” said McGovern. “Never before has it been more timely or necessary for us to work together to manage the escalating risk of natural catastrophes in the U.S.”

The report, “Managing the escalating risks of Natural Catastrophes in the United States,” is available at Lloyds.com/usnatcatreport.

Nine Principles
1.Lloyd’s nine principles for managing natural catastrophe risk in the U.S. are:
2.The first step in protecting U.S. property owners from natural catastrophe losses is ensuring there is a healthy, private insurance market
3.Government intervention in insurance markets should be kept to a minimum
4.Risk-based pricing is the fairest and most sustainable solution
5.Specialist international insurers and reinsurers add value to U.S. natural catastrophe market through additional capacity and expertise
6.Government and insurers must respond to changing trends in the frequency and severity of losses
7.The government has an important role to play in helping develop risk mitigation measures and rewarding adaptation to reduce the overall costs to the economy
8.The insurance industry has a key role to play in helping build more resilient communities
9.Good quality data and hazard mapping is critical to robust underwriting
10.Lloyd’s believes in encouraging a responsible approach to risk in society

http://www.insurancejournal.com/news/national/2011/09/27/217596.htm

InsuranceNewsNet.com
By Diana Rosenberg
September 27, 2011

The chief operating officer of the Florida Hurricane Catastrophe Fund, worried about volatility and uncertainty in the capital markets, is looking for state lawmakers to shrink the state-run reinsurer and reduce its reliance on borrowing.

“I don’t know where we stand right now in terms of the marketing ability of our debt,” said COO Jack Nicholson. The cat fund, created in November 1993 during a special legislative session after Hurricane Andrew, currently has $7.25 billion of cash on hand and some $18.55 billion of exposure — meaning in the event of a major hurricane, the cat fund may need to borrow $11.3 billion to meet its obligations.

Of the amount of exposure, some $17 billion is mandatory coverage. Nicholson wants to get that down to $12 billion, removing $5 billion of capacity over three years beginning in 2013.

He is working on a presentation to the state Senate, where he will outline proposals he hopes will be used as the basis of a bill for the next legislative session. In addition to lowering capacity by at least $5 billion through higher co-pays phased in over three years, Nicholson wants to immediately eliminate the optional layer, known as the Temporary Increase in Coverage Layer, or TICL, currently being phased out and due to dry up in 2014 (Best’s News Service, Aug. 15, 2011).

His goal is to seek no more than $5 billion to $7 billion from the capital markets, if necessary, rather than $10 billion or more.

Nicholson said he is “really concerned” about the long term and a one-in-a-100 year event.

“I don’t want to be in a situation where if we’re lucky, we survive,” said Nicholson, adding he doesn’t want the fund to “live on the edge” but live “comfortably.”

Lawmakers’ moves in 2007 to expand the cat fund in a bid to lower homeowners’ premiums “went too far,” Nicholson said. “The situation needs to be corrected.”

“We’re going to be as responsible as we can going forward” and structure things properly for the future, Nicholson said, adding he doesn’t want the fund structured in a way where it must offer a large amount of debt at the worst possible time. State law requires that if the cat fund doesn’t have sufficient cash to pay losses, other insurance lines — homeowners’, automobile, and commercial — be assessed to fund revenue bonds to pay for the losses. The current assessment is 1.3% for all policies written or renewed this year. The fund issued bonds in 2006, 2008 and 2010 to cover adverse loss developments from reopened claims from the 2005 hurricane season. Those bonds will be paid entirely in 2016, Nicholson said.

Citizens Property Insurance Corp., the state’s largest homeowners’ insurer and the cat fund’s biggest customer, agreed in May to pay $460 million for $6.6 billion of reinsurance coverage from the cat fund (Best’s News Service, May 12, 2011).

The cat fund is required by law to estimate its bonding capacity every May and October, Nicholson said. In May, four companies that provide those estimates for the fund had a wide spread of estimates — from as low as $4 billion to $23 billion.

Since the underwriting opinions were issued, the markets have been rocked by bickering over the U.S. federal budget deficit, Standard & Poor’s downgrade of long-term U.S. debt, concerns about European sovereign debt as well as U.S. municipal debt, Nicholson said.

When underwriters come up with new opinions next month, Nicholson is hoping for a narrower range among the estimates.

In June, A.M. Best released a statement that it “continues to be concerned” about the cat fund’s ability to pay all of its obligations in the event of a severe hurricane (Best’s News Service, June 1, 2011).

http://insurancenewsnet.com/article.aspx?id=278892&type=Propertycasualty

JS Johnson Strategies
By Scott Johnson
September 26, 2011

I’ve been waiting for the dust to settle–for the editorials to be written, victory to be claimed by Senator Fasano and trial lawyers; accolades to be placed and misplaced–before writing about Citizens sinkhole rate hearing.

And, of course, I’ve been waiting for the statutorily mandated, actuarially sound rate request to be significantly reduced, as it has been.

It’s time now to pay homage to the powerful few who got what they did not need or earn, at the expense of so many who don’t deserve to pay.

There are very few news articles that reflect a clear understanding of this complex issue. Some did a better job than most. You can read two of those by clicking here.

Unfortunately, most editorials favored preconception over fact; like the one published by the St. Pete Times. Click here.

The Times was right to compliment Kevin McCarty’s handling of the situation; under the circumstances he did what he had to do. However, while Senator Fasano speaks for several thousand homeowners who want unfair subsidies from several million; and, while Sean Shaw and Chip Merlin speak for lawyers and public adjusters–the media has a wider, more profound responsibility to speak for and expose the whole truth!

With a room full of TV camera’s it’s easy, even typical, for some to chide and finger point–particularly at public servants muzzled by fear of retribution. News outlets, however, should not join those who attack the integrity of honest, hardworking public servants. Citizens experts, staff and contractors, did what they were required by law to do – file actuarially sound rates for sinkhole activity coverage!

Supported by followers that he and Sean Shaw had primed in a separate meeting across the hall and for weeks before the hearing, Senator Fasano said “shame on Citizens!”

Shame? I say…shame on those who, seemingly without conscience, publicly deride hardworking honest people performing the most thankless insurance job in America!

While we’re at it; shame on the St. Pete Times which rewards falsehood and exaggeration with blind, one-way copy. ”Pulled out of thin air” it said, referring to the work of educated professionals whose certifications and livelihoods were at stake. It should’ve asked Sean Shaw and Chip Merlin whose blog was giddy over the results, which one of the hundreds of spreadsheets containing reams of data submitted by Citizens were wrong? The Times should explain, specifically, which rates were “pulled out of thin air.”

Using an understatement of galactic proportions the Times said… “despite all of the spreadsheets and historical data, setting insurance rates remains awfully political”.

But…whose fault is that? Citizens staff? Independent and certified actuaries on salary or negotiated fee’s? Or…The Times for spreading rhetoric from those making millions off of driveway cracks?

Were the three fully qualified actuaries and one Ph.D. economist who testified that the filing was sound, all lacking “competency”? Were the pages of discussion in Citizens’ public Actuarial Memorandum explaining how SB-408 was taken into consideration, all that “vague”?

Did the Times editorial board bother to read or even request a copy of the memorandum?

The Times said Citizens was out of touch! What would be more out of touch; following the law by filing actuarially sound rates, or ignoring financial motives of trial lawyers who use consumer fronting groups to bullhorn their point of view?

Citizens staff and outside experts showed their request to be less than half what it would be without the SB-408 reforms. And, Citizens board demonstrated even more concern by voting for a 50% cap. Why is the media impugning their motives instead of expressing concern for those consumers who will pay for such benevolence?

And who, exactly, precipitated the so called consumer “panic” The Times mentioned? Was it Citizens, Senator Fasano, Sean Shaw? Or, was it the media for regurgitating propaganda without demanding full disclosure.

I thought Sean Shaw and Chip Merlin were being sincere, saying they would take another look and get back to me. It was apparently lip-service, however, a trial lawyer delay tactic. Now, since The Times won’t do it, I’m left on my own to question what drives their advocacy.

Remember, according to the study conducted by the Senate B&I committee a majority of the claims for sinkhole cosmetics go to credit card debt, vacations and mortgage payoffs. Why is defending this unjust enrichment so important to lawyers who claim to advocate for consumers? Why is it worth the complete erosion of tax revenues in Hernando and Pasco counties? Why is it worth destroying property values of so many innocent homeowners on fixed incomes?

Nobody disputes that higher rates is a bitter message but, the messengers should not be shot. Rates follow costs. Citizens has been selling dollar bills for about 12 cents. The real solution was SB-408 which reformed cosmetic “sinkhole” coverage by stopping the big payoff for lawyers and public adjusters whose clients actions prove they didn’t even need the coverage.

Now, it’s time for the whole truth–lawyers like Sean Shaw and Chip Merlin need to either tell everyone what they gain promoting cosmetic sinkhole claims or Citizens and the OIR need to do it for them.

The St. Pete Times might not care. The media overall may not care.

But, those who do care should finally be given the whole truth!

http://johnsonstrategiesllc.com/citizens-sinkholes-the-whole-truth-again

The St. Petersburg Times
By Dan DeWitt
September 23, 2011

Blame Citizens Property Insurance Corp. The state-run insurer should have known struggling homeowners would rebel at the idea of paying as much for sinkhole coverage as for a decent used car — every single year.

Blame the state lawmakers who passed Senate Bill 408, which blew the cap off property insurance rates and could harm consumers in a bunch of other less obvious, more slippery, ways.

Blame our crazy, Swiss cheese geology that leaves western Hernando and Pasco counties uniquely susceptible to the settling known as “sinkhole-related activity.”

Yep, we can spread the blame all around.

As long as we save some for ourselves.

We’ve gone on a sinkhole-claims binge, we homeowners in Pasco and — especially — Hernando, which in recent years has surpassed its neighbor to become the sinkhole capital of Florida.

We don’t want that title, of course, but deserve it. Because enough of us have filed these claims that it says something — not good — about us as a community.

So far in 2011, 1,463 home owners in Hernando have filed sinkhole claims with Citizens, more than twice as many as in Pasco. We’ve already smashed 2010’s record of 1,161 claims filed with Citizens (one of them by County Administrator David Hamilton), which, by the way, was more than double the number filed in 2009, which in turn was way above the number filed in 2008.

This year, nearly half of Citizens’ sinkhole claims have come from Hernando, which means we bear about that portion of responsibility for the resulting financial strain.

Citizens’ outrageous plan to more than quadruple its average sinkhole premium (since trimmed to much more reasonable levels by state Insurance Commissioner Kevin McCarty) looks less outrageous if you consider this: The company paid $245 million in sinkhole claims last year while taking in only $32 million in premiums.

Many claims, of course, are legitimate. We’ve all seen the shattered patios, sloping door frames and single-story homes that turned into split-levels overnight.

But it’s no secret that many of them aren’t — that with Citizens’ sinkhole payouts averaging more than $100,000, a crack under a windowsill can look a lot like a winning lottery ticket.

Proving or disproving sinkhole-related damage is notoriously difficult, which, for insurers, makes claims expensive to contest. But only 40 percent of Hernando homeowners who have reported sinkhole damage since 2005 pulled permits for repairs. And if many factors have helped drive up the number of sinkhole claims filed with Citizens, none of them of explains the more than tenfold increase in Hernando since 2006.

What does? Greed and desperation, probably — people who overspent for houses looking for a way, any way, to salvage their investments.

They’ve been tempted by the ads of lawyers, sinkhole repair companies and public adjusters, and scared by the sight of grout trucks pulling into neighbors’ driveways.

Lynne Christian, spokeswoman for the Insurance Information Institute, calls it a “cottage industry,” though no cottage industry I know of can afford billboards on U.S. 19 or vast fleets of repair vehicles. In fact, other than doctors’ offices, it’s about the only sector of the local economy with a pulse.

It’s not just Citizens that is paying for all this, of course. We all are, and in many ways.

Why can’t you shop around for homeowners insurance here?

Mostly because sinkhole claims have chased away private companies. Citizens, the insurer of last resort, has 63 percent of the market in Hernando, compared to about 11 percent outside the Tampa Bay area.

Every time a property owner reports sinkhole damage to the Property Appraiser’s Office, the value of the house is cut in half. So far, that’s cost Hernando $281 million in the value of taxable residential properties.

Sinkhole claims will keep driving that value down because resale prices will go down. If you don’t believe me, go to the Hernando property appraiser’s website and pull up the map of Pristine Place, with each one of its 218 sinkhole houses marked with an alarming red triangle. To a prospective buyer in New York or Ohio, you can imagine, it looks about as appealing as a nuclear waste dump.

Then, finally, there will be higher insurance rates. SB 408 will likely reduce questionable claims and, in time, the size of rate increases. But at least for a while, Citizens will still lose money covering sinkholes and still have to raise rates.

So when you get the bill, remember to save some of the blame for us.

http://www.tampabay.com/news/business/realestate/hernando-homeowners-share-blame-for-citizens-sinkhole-mess/1193090