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Blow Hard

Florida’s combative insurance commissioner, Kevin McCarty, sees no knockout punch from a major storm in his state’s future.

By  Ed Leefeldt

[Page 5 of 7]

What’s your proof?

If you look at federal filings, the major insurers all publicly state that their strategy is to reduce coastal exposure. There’s no guarantee that these companies will continue to write homeowners policies in Florida even if that bill passes. Not a single company has indicated to me a willingness to either stay in Florida or write new business even if this proposal were adopted. (Editor’s Note: At press time, Crist had not yet signed or vetoed the bill.)

With all the major insurers cutting back, how will you plug the gap in coverage?

We have licensed nearly 30 homeowners insurance companies since January 2006. A diverse market is good for Florida rather than having a tremendous amount of risk concentrated in a few large players.

Critics argue that many of these new Florida-only entrants are just propped up by state reinsurance from the Florida Hurricane Catastrophe Fund, which is itself in trouble.

New property writers have brought in almost $2 billion in new capital, and many of them are financially capable of writing much more business.

The only firm that rates these new insurers, Demotech, Inc., had said it might pull their ratings after Florida admitted its catastrophe fund was under-funded.

I don’t expect any crippling rating changes. In fact, Demotech’s president said he expected to issue upgrades and confirmations as soon as possible.

Can all these new small insurers survive?

There will be winners and losers. Our goal is to see that each company has a viable plan to pay claims if a storm occurs. We stress test all of them, and if they’re not solvent they won’t be doing business.