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State Insurance Commissioner Kevin McCarty's claims of new capital propping up the property insurance market are again being called out — and this time some powerful people in the state are taking notice.
The claims were the basis for Gov. Charlie Crist's June veto of The Consumer Choice Act, legislation allowing some property insurers to set higher rates. But the Review questioned McCarty's claims in a July story, concerns noted by subsequent editorials in at least two daily newspapers.
Seeking clarification, Florida Chief Financial Officer Alex Sink asked McCarty to back up his numbers for a Cabinet meeting held earlier this month. Sink, a gubernatorial candidate, oversees McCarty's office.
But Coffee Talk learned that McCarty's 208-page report didn't arrive at Sink's office until 8 p.m. the night before the meeting. So much for clarification.
Now, the Competitive Enterprise Institute has critiqued McCarty's report, calling it “The Same Misinformation in a New Package.” The CEI points out that 88% of the $4.977 billion claimed by McCarty as new capital since 2006 comes from 18 of 47 carriers that serve the high-end, high-risk part of the market and are only subject to minimum regulation.
That leaves 29 companies, but as CEI and the Review pointed out, nine of those entered the market before the January 2007 property insurance market reforms. Of the remaining 20, six have not written policies, three don't write homeowners or mobile home policies and three more include $40.5 million of $115 million in “new” capital that comes from taxpayers as “capital buildup funds.”
The bottom line: There is a mere $166.5 million of new capital — 3.3% of what McCarty claims. And that's if you count the private capital portion from capital buildup companies and firms that took policies from Citizens Property Insurance Corp.
Subtract that, and there's only $29 million, barely half of a percent of McCarty's original number.
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