McCarty Deserves Some Credit for Stabilizing Florida Market

Testifying this week before the Florida House Insurance and Banking Subcommittee, Office of Insurance Regulation Deputy Chief of Staff Monte Stevens echoed much of what has been reported in recent months about Florida’s property insurance market: it has largely stabilized and, thanks in part to declining reinsurance rates, consumers are seeing their own rates decrease in most areas of the state.

This is indeed welcome news for Floridians who have otherwise seen their rates steadily increase and their options decrease in recent years. Though Stevens is right to credit the “buyers’ market” in global reinsurance, decisions made both by lawmakers and state regulators also deserve honorable mention.

As Citizens’ rates have steadily risen pursuant to the 10 percent “glidepath” enacted by the Legislature in 2009, many parts of the state have finally reached actuarially sound levels, on par with rates charged in the private market. This has led to a largely organic migration of policies from Citizens to private carriers, thanks to greater competition and coverage options among companies.

Taken together, all of these factors have led to responsible rate reductions in most parts of the state, as opposed to the arbitrary, politically imposed reductions that placed Florida one storm away from fiscal calamity a few years back. This confirms that market forces not only protect consumers from insurance insolvencies and massive taxpayer bailouts, but also promote the kind of competition and risk-sharing that eventually brings down rates.

Another major cost-driver contributing to rate increases over the past several years has been the proliferation of sinkhole claims, along with the consequent litigation. Legislation enacted in 2011 closed exploitable loopholes and has largely reined-in these claims, resulting in a 55 percent decrease in such losses for Citizens alone. The downward trend in sinkhole claims has slowed, and in most cases halted, increases in insurance rates.

Indeed, lawmakers and the governor deserve credit for enacting these laws, but Insurance Commissioner Kevin McCarty and the regulators in his office executing these laws also deserve credit. As rumors currently swirl about his future, it’s important to note that Florida’s insurance market has undoubtedly stabilized on McCarty’s watch.

The OIR has analyzed and approved Citizens “takeout” deals that transferred billions of dollars of risk from taxpayers to private companies, while simultaneously protecting consumers. Over 185,000 such policies were transferred in 2014 alone. They have also overseen the entrance of new insurance carriers into the state (ten property & casualty insurers in 2014), and streamlined the administrative process to make it easier for more companies to do business in Florida. And most importantly, they have carried out their core mission, which is to ensure that consumers are protected.

This is what insurance market stability looks like. But unless more is done, this stability is likely to be shaken, or worse, when Florida’s unprecedented hurricane-free streak comes to an end. The state should therefore continue taking steps to fortify its property insurance system, so that Florida isn’t left bare and vulnerable after the wind blows.