Florida Insurance Commissioner Kevin McCarty Reports to Florida Cabinet on Florida Homeowners’ Insurance Market

Jun 26, 2012


During the Florida Cabinet meeting today, June 26, 2012, Florida Division of Emergency Management Executive Director Bryan Koon advised Cabinet Members that Tropical Storm Debby has had the most impact in Florida’s Panhandle, with Wakulla County receiving 21 inches of rain.  On Sunday, June 24, tornadoes were reported statewide.  Further, the Soppchoppy River is expected to crest sometime today, while river flooding will continue to be an issue in the Panhandle for the remainder of the week. 

In his portion of the agenda, Florida Secretary of Commerce Gray Swoope gave a presentation on economic development to which he has implemented a team approach by facilitating communication and creating networks among state agencies that are prioritizing job creation.  Secretary Swoope also indicated that his department has been more aggressive in recruiting businesses to Florida.

A presentation from the Office of Financial Regulation (“OFR”) was given by Deputy Commissioner Greg Hila.

Prompted by the 2011 Enhanced Rule Review, the OFR requested approval to publish Notices of Proposed Rules in Florida Administrative Weekly to amend various regulations relating to financial institutions, which the Cabinet approved.


Florida Office of Insurance Regulation

Florida Insurance Commissioner Kevin McCarty also was on hand at today’s meeting, during which he gave a State of the Florida Homeowners’ Insurance Market Presentation.

Commissioner McCarty indicated to the Cabinet that he wanted to project three “take-away” items from his presentation:

  • Insurers’ improved financial profitability
  • Reinsurance capacity is increasing
  • Florida companies are in good position to handle catastrophic events

After Hurricane Andrew in 1992, about 20 percent of insurance companies left the state of Florida.  Since that time, Florida domestic insurers have been depended upon to provide capacity in the market. 

The current capital position of domestic companies has increased by $377 million since 2009, Commissioner McCarty reported.  This additional capital is allowing companies to provide additional capacity in the marketplace.  Underwriting gains have increased by over 300 percent from the First Quarter of 2011 to the First Quarter of 2012.  In addition to traditional capacity available in the reinsurance market, there is over $2.5 billion in non-traditional reinsurance available to Florida insurers, which creates competition for the traditional reinsurers.  The increase in non-traditional reinsurance is attributed to money managers seeking alternative investments due to stagnant markets.  According to the Florida Office of Insurance Regulation’s (“OIR’s”) annual reinsurance data call, 96 percent of Florida domestic insurers are reinsured up to a 1-in-80 year event. 

Commissioner McCarty expressed optimism that the market is well-positioned to handle any challenges presented during the 2012 storm season. 

Florida CFO Jeff Atwater asked whether the improving market statistics are attracting interest from national insurers to return to Florida.  Commissioner McCarty indicated that a few national companies may “put their toe in the water,” but there is a concern expressed by national insurers and reinsurers alike.  Both are concerned with Florida’s ability to absorb a storm politically, and the potential policy reactions from Florida politicians in the event of a big storm. 

CFO Atwater asked Commissioner McCarty whether the OIR needed additional resources to provide timely response to filings made by property insurance companies pursuant to SB 408.  The Commissioner indicated that the OIR has started to address the backlog by expediting some simple filings and communicating with insurers as to how to more efficiently make filings. 

Florida Governor Rick Scott introduced Barry Gilway as the new President and CEO of Citizens Property Insurance Corporation (“Citizens”).  Mr. Gilway indicated that Citizens has already received over 1,100 claims from Tropical Storm Debby.  He then provided a brief opinion on the future of Citizens, saying that Citizens should operate like a private company and never compete with private companies on the basis of price. 

Mr. Gilway said he believes there has not been enough effort to make the public aware of the true costs of insurance from Citizens. 

Next as part of his portion of the Cabinet agenda, Commissioner McCarty requested Approval for Publication of Proposed Amendments to Rules 69O-137.001, Annual and Quarterly Reporting Requirements and 69O-138.001, NAIC Financial Condition Examiners Handbook. These Rules are being amended to adopt the current versions of the National Association of Insurance Commissioners’ (“NAIC”) instruction manuals and the NAIC Financial Condition Examiners Handbook.  The adoption of these Rules would put Florida in compliance with national standards, he explained.

The OIR requested approval for Publication of Proposed Amendments to Rule 69O-149.003, Rate Filing Procedures.  Pursuant to Section 627.410(6)(a), F.S., health insurers seeking to issue or renew health insurance policy forms in the State of Florida must submit documentation to the OIR demonstrating that the proposed policy’s premium rates are reasonable in relation to the benefits provided.  Proposed Rule 69O-149.003 provides insurers with instructions on how to make these filings.

Rule 69O-149.003(5) allows insurers without fully credible data to make streamlined rate increase filings with the OIR that are simpler in format and content than the full filing format defined in Rule 69O-149.003(2).  Insurers that qualify and elect to file streamlined rate increase filings with the OIR are limited to rate increases equal to the maximum annual medical trend for medical expense coverage or the maximum annual medical trend for Medicare Supplement coverage.  The current version of Rule 69O-149.003(6) includes tables that display the applicable maximum annual medical trend. The proposed Rule amendment simply makes these tables available on the OIR’s website instead of in the Rule itself.  The OIR will update the tables as needed.

Rule 69O-149.003(5)(a) defines the qualifications insurers must meet to make streamlined rate increase filings. These proposed amendments to 69O-149.003(5)(a) provide for streamlined rate filings for Medicare Supplement providers with fewer than 1,000 policyholders nationwide, rather than to 1,000 policyholders in Florida.

Approval for Publication of Proposed Amendments to Rule 69O-149.022, Forms also was requested.  The purpose of this Rule is to update and edit the contents of the Universal Standardized Data Letter form and instructions used by life and health insurers to make electronic form filings via the OIR’s I-File system. The proposed revisions simplify the reporting entries to reflect recent technological upgrades.

Commissioner McCarty further requested approval for Publication of Notice to Repeal Rule 69O-164.030.  The OIR recently conducted a comprehensive review of all agency Rules to determine whether some should be modified or eliminated. As a result, it has been determined that Rule 69O-164.030, which concerns reserving approaches for guarantees established by universal life insurance policies, is unnecessary and should be repealed, thereby making the Florida Insurance Code more consistent with the NAIC’s corresponding model laws and rules.  This is expected to reduce the regulatory cost of doing business in Florida.

Requests were made for the approval for Publication of Notice to Repeal the following Rules, inasmuch as the statutes adopted to implement them have been repealed or they restate language already contained in statute or Rule:

  • 69O-198.003, License Required
  • 69O-200.013, Rate Filings
  • 69O-170.012, Sinkhole Insurance
  • 69O-191.072, Reinsurance (excess Loss Insurance)

Further, the OIR requested approval for Publication of Notice to Repeal Rule 69O-143.045, which was originally promulgated in the early 1970s and defines a list of insurance terms, many of which are inconsistent with current portions of the Florida Insurance Code. 

The OIR requested approval for Publication of Notice to Repeal Rule 69O-142.011, Insurer Conduct Penalty Guidelines, which establishes guidelines for the assessment of administrative fines concerning certain violations of the Florida Insurance Code.  This Rule became effective on November 6, 1994.  Since that time, many of the fines it prescribes have become antiquated. Section 624.4211, F.S. contains guidelines for the assessment of administrative fines. As a result, this Rule is unnecessary and, according to the OIR, should be repealed.

Approval was requested for Adoption of Proposed Amendments to Rules 69O-200.004, 005,.006,.009,.014,.015, Auto Manufacturer Warranty Rules.  In Sections 634.011(7) and 634.041(12), F.S., the Florida Legislature created a new category of Motor Vehicle Service Agreement Companies called “Motor Vehicle Manufacturers.”  The purpose of the legislation was to eliminate certain regulatory requirements for these large corporations under certain circumstances. The proposed Rule amendments address the legislative mandate to modify these Rules and forms to incorporate this new category.

Finally, the OIR requested approval to repeal Rule 69O-170 Part V; Arbitration Rules. Section 627.062(6), F.S. originally granted insurers the right to arbitrate rate filing disputes with the OIR. The Florida Financial Services Commission adopted the above referenced Rules regarding arbitration of rate filings. This section of law has subsequently been amended to remove the provision for arbitration. Consequently, the OIR requested that the Rules associated with it be repealed.

The Cabinet unanimously approved all of OIR’s requests.  To view complete OIR meeting materials from Commissioner McCarty’s presentation today, click here.


Florida Department of Revenue

Marshall Strandburg was selected by the Cabinet as the Interim Executive Director of the Florida Department of Revenue.  Mr. Strandburg currently serves as Deputy Executive Director and has been with the Department of Revenue for over 20 years. 


State Board of Administration

A presentation from Florida’s State Board of Administration (“SBA”) was provided by its Executive Director, Ash Williams. 

As part of its Cabinet agenda today, the SBA requested approval of fiscal sufficiency of an amount not to exceed $630 million for State Board of Education Public Education Capital Outlay Refunding Bonds.  It also requested approval of fiscal sufficiency of an amount not to exceed $50 million for the University of  Florida Board of Governors’ Student Activity Revenue Bonds.

Approval of a draft letter to the Joint Legislative Auditing Committee for annual certification of legal compliance and best investment practices for the local government surplus funds trust fund also was requested.  An independent statutory compliance review was performed, the findings of which were presented to the SBA Investment Advisory Council and Participant Local Government Advisory Council at its joint session on June 25, 2012.

Another review was performed of the various aspects of the Local Government Investment Pool to determine whether its management and operations are in line with best practices.  These findings also were presented at the aforementioned June 25, 2012 meeting.

The SBA requested approval of investment policy statements for the Local Government Surplus Funds Trust Fund and for the Fund B Surplus Funds Trust Funds.

The Investment Policy Guidelines for the Local Government Surplus Funds Trust Fund must be annually reviewed by the Investment Advisory Council and the Participant Local Government Advisory Council, and reviewed and approved by the Trustees. The most recent review and approval of the Local Government Surplus Funds Trust Fund Investment Policy Guidelines by the Trustees was on June 16, 2011.

The Cabinet unanimously approved all of the SBA’s requests, which included approval of the Florida Hurricane Catastrophe Fund’s proposed budget and statutory “Major Mandates” Investment Performance Report.

To view the complete agenda from today’s meeting, click here.

The next Cabinet meeting will be held on Tuesday, July 17, 2012 in Tallahassee.


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