Florida Office of Insurance Regulation Reviews Castle Key Insurance Companies’ Rate Filings

Aug 7, 2012


The Florida Office of Insurance Regulation (“OIR”) held a public rate hearing for Castle Key Insurance Company and Castle Key Indemnity Company (“Castle Key”) today, August 7, 2012.  The OIR officials present at the hearing were General Counsel Belinda Miller, Property and Casualty Division Director Sandra Sterns, Property and Casualty Deputy Commissioner Rich Koon, Assistant General Counsel Kenneth Tinkham and Actuary Bob Lee.  The OIR officials specified that they are reviewing two filings:  1) Castle Key Insurance Company and 2) Castle Key Indemnity Company.

Following brief opening comments by the Castle Key representatives, Mr. Lee posed a series of questions relating to the filings.  He clarified that the requested statewide average rate increase is 32.4 percent for Castle Key Insurance Company and 22 percent for Castle Key Indemnity Company.  For each filing, the rate increases by county range from a low of 1.8 percent to a high of 72.4 percent.  He also determined that Castle Key will non-renew a significant portion of its business. 

Mr. Lee noted a 4.9 percent profit provision in the filings.  However, this number may not be accurate because certain assumptions may change.  Mr. Lee suggested this is an important part of the filings that will be factored moving forward and urged the Castle Key representatives to update and confirm the actual profit margin.

The dialogue included discussions on reinsurance costs.  Mr. Lee expressed concerns about the manner in which the retained losses were adjusted.  He also questioned the use of countrywide costs in a Florida only filing. 

The Castle Key representatives stated that the change in the sinkhole statute limiting a claim filing to two years from the date of the loss is immaterial.  This is due, in part, to an uptick in claims leading up to the two-year deadline, they said, adding that the clock does not begin until the insured knows, or should have known about the loss.  Thus, the Castle Key representatives did not indicate savings in the filing based on sinkhole law changes.

There was also discussion on savings from changes in the statute relating to payment of claims based on the actual cash value versus the replacement cost.  OIR officials were concerned that the filing did not reflect any savings from this statutory change.  The Castle Key representatives stated they would revisit the opportunity for savings. 

OIR officials asked questions about the impact of new hurricane models on the filing.  The Castle Key representatives said their company used the newest model approved by the Florida Commission on Hurricane Loss Projection Methodology because, in their business judgment,  it is the best and most accurate model available to date.  The OIR officials questioned whether the model’s changes were reasonable. 

Florida Insurance Consumer Advocate Senior Counsel Brian Deffenbaugh provided testimony relating to the filing.  He expressed concerns with the lack of savings based on legislative changes in the filing.  He urged the Castle Key representatives to look at capping the rates on some of the coastal risks so their companies would not be non-renewing so many policies. 

Florida Insurance Consumer Advocate Robin Westcott expressed concerns that the policies being shed will be forced into Citizens Property Insurance Corporation.  She suggested that legislative changes in actual cash value and replacement costs should reduce premiums and should be included in the filing.  She also noted that, in her opinion, the property market still needs comprehensive changes.

There was no public testimony from the audience.

The record will remain open until August 24, 2012 for additional written comments.

To view materials from today’s hearing, click on the hyperlinks below:


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