Florida Insurance Commissioner McCarty Signs Off: ‘It’s Been a Labor of Love’

It’s not for the faint of heart, I can tell you that… Anyone who comes in here and thinks it’s an easy job really does not have any idea what they’re getting into. But it’s been a joy…It’s been a labor of love for me to serve in this capacity. It’s been a great challenge, but it’s been a great reward as well.”

That’s how Kevin McCarty signed off his last interview as Florida Insurance Commissioner with Insurance Journal after a nearly 13-year career serving the state. Retrospective, candid, and modest, McCarty talked about many of the issues he’s tackled during his tenure, and said he hopes his legacy will be remembered as one of fairness and respect.

“I think I’ve prided myself and promoted within our organization a culture of what I consider fair hearing. I want everyone to know that everyone who comes to the Florida Office will be given a fair hearing, and that we’re not predisposed on one side or the other,” McCarty said.

McCarty said his advice to his successor is to consider the many different backgrounds and experiences of those he or she will work with and serve.

“The most important thing is to come here with an ability to listen to the advice and counsel of a variety of people, and to make it a practice to ensure that you’re getting the benefit of all the information and taking in all of the stakeholders’ positions before you make a decision,” McCarty said. “Every decision you make can affect millions of people directly or indirectly.”

McCarty said balancing working with insurance companies versus protecting the consumers is part of the job that he has taken very seriously.

“Striking that balance is very important because I firmly believe that capital markets work 90 percent of the time,” he said. “I think the [government’s role] has to be very strategic, and it needs to be a very limited role for those people who need it.”

Read on for more highlights from McCarty’s interview:

On Strength of Florida Insurers

McCarty said his successor will inherit a Florida property market that is in the strongest position it’s been in a decade. McCarty also touted the stability of Citizens Property Insurance Corp. and other insurers in the state.

“Through our stress testing last year, we’ve seen that our companies can withstand a Hurricane Andrew or the 2004 or ’05 seasons. We’ve even seen Citizens get to the point where they could successfully take a 1-in-100-year event without doing an assessment, which is pretty remarkable,” he said.

McCarty disagreed with claims that Florida’s newer insurers haven’t been tested and would falter if a big storm hit the state. He said many of them have been tested by catastrophes in other regions.

“Those are things that we look at in addition to their ability to maintain the capital position. Some of these companies have been tested in other areas. They were in the Northeast for Superstorm Sandy, and paid claims during that time,” he said.

That said, McCarty added, not every company is destined to succeed.

“There will be failures in any scenario. We’re in the risk assuming business, and when you’re in the risk assuming business you’re going to have companies that fail. That’s just a reality,” McCarty said.

On Florida Challenges

McCarty said flood insurance is an ongoing issue for the state as the NFIP’s rates continue to go up and the program goes further into debt. McCarty has worked with several Florida legislators on addressing the flood insurance rate problem. Last year he requested ratemaking data from FEMA of Florida policyholders.

The state has also passed laws encouraging insurance companies to offer flood insurance in Florida. But he says more will need to be done.

“I frankly don’t know how my successor can ignore that issue. So much of the Florida marketplace dominates the federal flood program,” he said.

The skyrocketing increase in water loss claims as a result of what many are claiming is abuse of policyholders’ assignment of benefits (AOB) is another issue McCarty sees as a top priority for his successor. In his final months he approved policy form wording changes submitted by Citizens to encourage policyholders to contact Citizens first in the event of a water loss.

“We have been encouraging companies to look at the Citizens’ filings, but it is important to note that this is not a cutting of benefits,” McCarty said. “We worked very hard with Citizens to craft a balance to make sure that the language that has always been intended is in the contract.”

McCarty said the workers’ comp market will also need to be closely watched. While rates have gone down consistently since reforms were passed in 2003, cases currently before the Florida Supreme Court could impact this market.

“Any one of those cases could wreak havoc in the marketplace, and we would have to be poised to take whatever necessary legislative action to ensure stability in the marketplace,” McCarty said.

On What He’s Most Proud Of

McCarty said Florida has excelled in joining the international arena, now having a major influence in the development of capital, new companies, enterprising ways of bringing capital to Florida and innovations in surplus notes.

“I think Florida’s one of the first states to provide reduction in collateral, to provide a greater incentive for reinsurers to come to Florida,” he said.

The depopulation of Citizens is another accomplishment that McCarty said he takes partial credit for, along with Gov. Rick Scott, who he said was “masterful at bringing investors’ confidence into Florida” and the Florida legislature for making the necessary changes to attract capital, and Citizens itself.

“I think working in concert together, we have been able to successfully move Citizens down,” he said. “If there were a 1-in-100-year event today, there would be no assessment…I think the state should be very proud of that,” McCarty said.

On What He’s Learned

McCarty says he’s tried to look at each opportunity, even the difficult ones, as a teaching moment over the last 13 years.

“There are things that I would do differently today than I did yesterday,” McCarty said.

McCarty said he is better able to recognize what is needed for a business to succeed, and learned to adjust his thought process when making determinations of issuing licenses to new companies.

“In hindsight I think I should have been more probative, if you will, of these business plans…just because you put your money up…you still might not know what the heck you’re doing,” he said.

McCarty said he and his staff now identify when a business plan is challenged and offer ways it can be improved.

“I think we’re much more cautious today in terms of licensing, and less deference to someone because they are willing to put money up,” McCarty said.

On What’s Next

On April 20, McCarty announced he would extend his resignation date until 45 days after his successor is appointed.

McCarty said he was taking the action “to honor my commitment to facilitate a smooth transition as the 2016 hurricane season approaches. I remain committed to continuity of leadership for the benefit of [OIR] and the people of Florida whom I serve.”

McCarty said he will miss the service aspect when he leaves OIR.

“It’s been a wonderful journey for me, the last 12 and a half years. I found it to be a very rewarding time in my tenure here, not only as insurance commissioner, but in the previous years in the former department of insurance,” he said.

McCarty said there are particular opportunities at this time that he thinks would be a good fit with his skills and abilities. He wouldn’t say what those opportunities are, but a report from Florida Politics via SNL Financial quoted unidentified sources saying McCarty was vying for the National Association of Insurance Commissioners (NAIC) CEO position. His office would not confirm or deny the report.

McCarty said, “I’m going to take a little time to give some thought to my future, and when I have a firmer determination, I’ll be happy to share that with you.”

In the meantime, McCarty has confidence in the future for the Florida market.

“I feel really comfortable that I’m leaving at a time when there is a great deal of stability in the financial strength across most sectors of the market. I look forward to transitioning my successor through this period, and then moving on to new challenges,” he said.

Hear the entire interview on InsuranceJournal.tv

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