Florida's property insurance companies are paying less for reinsurance than they were last year, but those savings are not being passed on to their policyholders, and one state representative is demanding to know why.
As the commissioner for the Office of Insurance Regulation, it is my understanding that you alone are responsible for approving or disapproving the rates for insurance companies, freshman Rep. Ray Rodrigues, R-Estero, writes to Commissioner Kevin McCarty in a June 24 letter obtained by Sunshine State News. What is the process and timeline for insurance companies to include the decreased cost of reinsurance and when, from a practical standpoint, will long-suffering Floridians begin to see rates stabilize and decrease in many cases based on reinsurance savings?
[Scroll down to read the letter, attached to this article.]
Reinsurance is a special type of insurance purchased by insurance companies in order to protect themselves against losses they would have to suffer when making a huge payout. With reinsurance, insurance companies are able to cover properties they otherwise wouldn't be able to afford to -- e.g., homes in high-risk areas like hurricane-ridden Florida.
As you know, it is in the best interest for Floridians to close the 'gap' between rates in Citizens Floridas government insurance company and private insurance companies, Rodrigues writes, referring to the artificially cheaper rates paid by Citizens policyholders compared to their private-sector counterparts. A part of closing the gap, I would think, would be that the premiums for private insurance policyholders decrease in 2014, assuming the insurance company has adequate or even better reinsurance backup.
Florida's property insurance rates skyrocketed after the 2004-2005 hurricane season, in part because of the costs insurance companies have incurred acquiring reinsurance for policies in high-risk areas. According to an op-ed recently published by Bradley Kading, president and executive director of the Association of Bermuda Insurers and Reinsurers, reinsurance rates decreased by an average of 15 percent or more across Florida, as more investors have purchased shares in reinsurance companies.
Reach Eric Giunta at egiunta@sunshinestatenews.com or at 954-235-9116.
