From Dan Kraut at Bloomberg:
Policy sales by U.S. property and casualty insurers probably declined for a second straight year in 2008, the first back-to-back decline since the 1930s, A.M. Best Co. said.
Rate reductions contributed to the drop along with “the current recession, the credit crisis, the housing correction, rising unemployment and higher energy prices,” the Oldwick, New Jersey-based firm said today in a statement distributed by Business Wire.
From MSNBC:
“As State Farm Florida customers in 32 Florida counties began their scramble to find private Florida home insurance after last week’s announcement and subscribed to our service, they provided a rare, inside look at what the Florida home insurance market will face as it attempts to absorb hundreds of thousands of policy cancellations…
“This is just the beginning of a long, painful process. As the Florida home insurance crisis continues, we’ll be there to help Floridians find, screen and contact the Florida home insurance companies looking to compete for their business.”
From Mary Partington at the St. Pete Times:
The divorce notice was in the St. Petersburg Times. It was the headline. Soon the mail brought the letter addressed to us. It looked so final, and it was unexpected. State Farm was dropping all the property policies in the state of Florida…
As captive agents, they are unable to write business for other companies. With angry customers wanting to take all their insurance to another company the agents are unable to keep them as customers.
From Brent Kallestad at the AP:
TALLAHASSEE, Fla. – State Farm Florida has lost hundreds of millions of dollars in the state in the last decade and risks insolvency if it continues writing property insurance here, company executives told a legislative committee Tuesday…
The company most recently sought a 47.1 percent rate hike, although Hill said the company needed an increase loser to 67 percent.
Miller noted that regulators approved a 52.8 percent rate increase for State Farm two years ago and that the 47.1 percent request was not justified.
From Anika Myers Palm at the Orlando Sentinel:
State Farm Florida Insurance Co. announced Jan. 27 that it no longer will provide liability or damage coverage for homes, condos, commercial properties, personal goods or boats because of regulators’ refusal to approve higher premiums…
“I think some consumers are upset,” said Robert Ritchie, chief executive officer of American Integrity Group, a Tampa insurer that says it has been getting calls from State Farm customers and could take on as many as 50,000 new policyholders…
“It’s well underwritten, it’s spread around the state, and State Farm has been shedding some of its higher-risk areas,” said Locke Burt, CEO of Security First Insurance, which hopes to pick up about 50,000 State Farm policyholders…
Another company, Edison Insurance, has put a special message for State Farm policyholders on its Web site. CEO David Howard said the St. Petersburg insurer is offering policies that cost about the same as those sold by State Farm Florida…
Orlando-based Olympus Insurance Co. is not doing anything special to attract State Farm customers, but it could pick up as many as 150,000 policies — “assuming that we could get a proper distribution geographically” to manage exposure in high-risk coastal areas, Olympus President William Lowry said…
Jim Graganella, CEO of Tallahassee-based Capitol Preferred Insurance Co. and Southern Fidelity Insurance Co., said the two companies combined could take on about 100,000 State Farm customers, which would double the companies’ client base.
From Slabbed:
According the the Insurance Information Institute Mississippians pay the 6th highest rates for homeowners insurance (HO) in the country in a state with 6 coastal counties of 82 total. We are one slot ahead of earthquake prone California, three slots below the Florida, the entire state of which is prone to Hurricane wind damage. By way of contrast South Carolina’s HO rates come in at number 16 despite being low and having a very developed coastline. North Carolina, with it’s famous outer banks of inhabited barrier islands comes in at 33 while Georgia, home to historic Savannah check in at 27. Texas and Louisiana check in with the highest and second highest HO rates respectively…
The Mississippi GOP has chosen to directly subsidize our wind pool with the money going to buy more reinsurance. Florida, OTOH now requires transparency and learned first hand that bending over backwards for insurers didn’t mean the citizens got a good deal. Does State Farm’s announcement it was leaving Florida last week really mean Mississippi’s insurance market (where State Farm is refusing to write new policies) is “healthier” than Florida’s (where the Farm is pulling out)?
From the cited Sun Sentinel:
Nearly half of Citizens’ 1.1 million policies are in South Florida. With roughly $422 billion in property exposure, Citizens has been shedding policies amid concerns that it will be undercapitalized if we’re hit by The Big One.
From the cited Palm Beach Post:
State Farm and its defenders blame government regulation. But for the 15 years after Hurricane Andrew in 1992, state government did lots of favors to keep private property insurers here. The state put all taxpayers on the hook for as much as $28”billion in losses the companies couldn’t pay. The state set up an appeal process for rate requests, and the industry usually won. The state let the industry get out of covering damage from mold, sinkholes and wind-driven water. The state set up an insurer to take high-risk hurricane policies. The state spent $250 million to help people harden their homes. The state spent $250 million to lure more insurers.
But for two years under Gov. Crist, things have been different. When the state approved a plan to help the insurers lower rates, the Legislature required that companies pass on savings to consumers. Last year, the state threatened Allstate with loss of its auto business to make the company back down on a ridiculously high rate request. Rate requests now go to administrative law judges. One such judge just agreed with the Office of Insurance Regulation that State Farm didn’t deserve a 47 percent increase.
From russell1200 in Slabbed’s comments:
North Carolina’s State Pool system is an amazingly bad idea for the insurers. Almost guaranteed to bankrupt some of the smaller insurers if a big one hits Wilmington. Almost everyone on the cost now uses the State policy because it is grossly under priced. If the State Pool (which is underfunded of course) runs out of money, they levy money against the insurance companies that do business in the state.
From commenter supsalemgr:
I live in Western NC and I can tell you we are not interested in subsidizing the folks on the coast.
From commenter Brian Martin:
When the industry says that the pools do not charge “actuarial rates” what the mean is they want the pools to buy much more reinsurance at excessive cost beyond any economic reason. If reinsurance was reasonably priced then State Farm, Allstate, et al would buy it and cover everyone and we would not have state pools….
Reinsurance is not a competitive market so there is no market pricing. The pools have to pay such high rates for reinsuance that the so-called actuarial rate would be 7 to 10 times higher than the expected losses. No one should pay that much. At best, the political factors only serve to limit the gouging to 5 times the expected losses instead of 7. It doesn’t make any more sense for the wind pool to pay that than it would for State Farm or Chevron to pay it.
A federal program could charge risk-based premiums much closer to the expected losses, spread the risk across the Gulf and Atlantic much better than the single state pools, and would not be subject to the volatility of the reinsurance market that produces wild swings in prices after every catastrophe or every down cycle in the financial markets…It doesn’t make sense for the MS pool to pay $65 million for $470 million reinsurance for a 1 in 50 hurricane. Do the math.
From the author in the comments:
My question is why is this country depending on the insurance equivalent of loans sharks for capital and in the process allowing it’s citizens to be raped subsidizing offshore reinsurers?
From New Bern’s Sun Journal:
As the General Assembly convened last week, Senate Bill 6 was introduced “to impose a temporary stay on increased surcharges and deductibles.” The bill would prevent the rate hikes from going into effect on homeowners’ principal residences valued at $150,000 or less.
The insurance hikes are also the target of a lawsuit filed in Hyde County and an appeal to the North Carolina Court of Appeals. Carteret County has joined in the legal action, and Craven and other area counties are being urged to do so by the Business Alliance for a Sound Economy…
he Alliance says this would be the third insurance rate increase since 2005. It offers as example that an Onslow County home valued at $150,000 would see the homeowner premium go up 29.8 percent, to $1,616. At the same time, for a home similarly valued home in Charlotte, the premium would drop 4 percent to $529…
Some insurance companies, like Allstate, have backed out entirely on underwriting new coastal insurance policies in North Carolina.
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