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It's Not Grandstanding; It's Common Sense
Dear Editor:
After reading Matt Walsh's column, "Gallagher Grandstands Again," my gut instinct was to heed former Los Angeles Dodgers Manager Tommy Lasodra's advice: "Never argue with people who buy ink by the gallon." However, I believe it's important to share my perspective on these matters.
Instead of calling the rate freeze I asked for "grandstanding," several insurance companies informed us they thought the temporary freeze was a good idea. Instead of lurching forward and doing business as usual after a devastating hurricane season, they said it might be more productive if they took a breath and worked with policymakers to improve the mechanisms we use to manage the homeowners insurance market in Florida.
What is more important is the reason I called for the freeze. Because the Legislature is looking at a variety of measures that could ease pressure on homeowners' rates, I asked that insurers wait until the session is over before making any new rate filings. If an insurer is considering a rate filing, we want to wait a couple of months so it can factor any new legislation into its rate calculations.
After the most destructive hurricane season in our history, only one company has become insolvent and more than $1 billion in capital has been pledged to Florida's insurance companies. Additionally, five new homeowners companies have been licensed to do business and a number of other companies have submitted applications to write homeowners insurance. Some of these companies have plans to take thousands of policies out of Citizens Property Insurance Corp.
On the subject of Citizens, in December I impaneled a task force to review the company's operations from top to bottom. The task force has submitted a list of recommendations to lawmakers, and we look forward to legislative action on them. These recommendations are aimed at making Citizens stronger, more efficient and at giving its customers top quality service.
Mr. Walsh characterizes the market changes we created after Hurricane Andrew as "layers of regulation" or artificial rate suppression. But in the accompanying excerpts Dr. Robert Hartwig, who Walsh quotes almost exclusively in his column, calls these programs "...the significant and largely successful reforms following Hurricane Andrew."
Insurers are not required to participate in the Florida Hurricane Catastrophic Fund, they choose to participate - overwhelmingly. Because there is no profit component and because of its tax-exempt status and low overhead, coverage from the CAT fund is a fraction of the cost for private reinsurance. And the CAT Fund keeps those dollars growing here in Florida rather than having them sent off to Bermuda or London.
Homeowners insurance for a $200,000 house in Hillsborough County could cost over $300 more per year more without the CAT Fund; in Miami those savings can be as much as $1,820. These savings help to support Florida's businesses, to expand our economy and to create jobs.
Legislation being considered by lawmakers will make it easier for CAT Fund dollars to be used to protect policyholders, particularly if we are hit with another multiple storm season. This change is overwhelmingly supported by the insurance industry and will make Florida even more attractive to investors and to their capital. More important, this measure will ease pressure on rates.
Following last year's devastating string of four catastrophic hurricanes, Florida's insurance market has not only survived the worst, it is attracting new companies and new capital. This is largely due to the public/private cooperation to respond to past disasters and due to the same cooperation that is being exhibited following last year's storms. That's not grandstanding, that's just plain common sense.
Tom Gallagher
Chief Financial Officer,
State of Florida
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