As Florida seeks to revive its private home insurance market after almost a decade without a hurricane, homeowners are pouring $6 billion a year in premiums into a new generation of small, in-state insurance companies with an unproven record of withstanding a major hurricane.
A consumer-oriented rating agency, Weiss Ratings, recently awarded the companies a median grade of C-minus, and even without a major storm to drive up claims, 11 of them have already failed in Florida since 2006, according to state records.
“This is an accident waiting to happen,” said Gavin Magor, senior financial analyst with Weiss, a national agency with a reputation for tough ratings based in Jupiter, Florida.
Responding to the Weiss ratings, Robert Hartwig, president of the Insurance Information Institute, a trade association, said all the companies meet state regulations, noting that other rating agencies gave higher grades.
“Things are moving in the right direction for Florida in attracting private capital. The risk has been diversified and there’s clearly an appetite for this new risk,” said Hartwig.
Almost 80 per cent of Florida’s insured residential and commercial property, valued at about $3 trillion, lies in coastal areas vulnerable to both wind damage and flooding, according to risk modeling experts.
State officials have encouraged the growth of the private market in recent years, seeking to downsize the overloaded state-run Citizens Property Insurance Co., which ballooned as it took on policies after the major companies withdrew.
The major insurers have stayed away from Florida, saying state regulators require rates that are too low to make the risk of doing business profitable.
Citizens remains the single largest carrier in the state, with 14.5 percent market share.
I think we all know that what we have here in Florida is not what we want, but it is all we have. Citizens is not a great place to be and the Private market provides better policies and coverage so we need these new smaller carriers. We need them because the big carriers like State Farm, All State, GEICO, Progressive, Traveler’s, Liberty Mutual, Nationwide and even USAA have all stopped writing new business here in Florida. I think the real question is why is this being allowed when they write business in other states? They should be told to write all lines of business at some price or leave the state!!! No one is willing to tell them this and stand up to them so this is what we have left to deal with. Lawmakers in Tallahassee do not want to do things that make waves because this will not get them re-elected!!!
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