HB 1171 Sponsor Sends Letter Refuting McCarty’s Assessment of Bill

Jun 5, 2009

Florida Representative Bill Proctor, sponsor of the controversial House Bill 1171, has written a letter to Florida Insurance Commissioner Kevin McCarty in response to Commissioner McCarty’s suggestions about the strength of the insurance market.  HB 1171, which would allow some large property insurance companies to raise rates without state regulatory approval, has not yet been presented to Governor Charlie Crist, who said on June 3 that he would be inclined to veto the bill.

“Insurance companies are important to have, particularly in the setting that we’re in right now,” Governor Crist said.  “But I think it’s also important to have appropriate regulation.”

To read the story from The News Service of Florida, click here.

A copy of Representative Proctor’s letter is below.


Should you have any questions or comments, please contact Colodny Fass.


The Florida House of Representatives
Representative Bill Proctor
District 20

June 4, 2009

Commissioner Kevin McCarty
Office of Insurance Regulation
200 East Gaines Street
Tallahassee, Florida 32399-0308

Dear Commissioner McCarty:

This is in response to your letter of the 1st of May. It is regrettable that House Bill 1171 has been associated with the State Farm filing and subsequent events. The impetus for House Bill 1171 dates back to 2007 when a constituent asked why he could not retain his policy with USAA, as he was willing to pay the rate the company was quoting. You may recall our correspondence regarding the matter.

Quite apart from any issues you may have with State Farm, there is a much broader concern. It is the state’s precarious situation in the event of a major storm or storms striking metropolitan areas. Apart from its assessment powers the Citizens Property Insurance Corporation (Citizens) is likely to prove insolvent in the wake of a major storm, and the CAT fund has limited assets in terms of its exposure. Insofar as I can discern from your letter, the state’s property insurance program relies heavily upon Citizens and the new Florida-based insurers.

In your letter to Governor Crist of 14 May 2009, you made mention, as you have in the past, of “40 new property insurance writers with more than $4 billion in capital since 2006.” As to the new insurers, admittedly, I have some reservations regarding their combined claims-paying capacity; hence, I posed several related questions in my prior communication.

In recent weeks, I have attempted to gain a more complete understanding of the extent to which these companies might comprise a component of a comprehensive homeowner’s insurance program. My efforts in this regard have simply raised more questions. These are as follows.

1) With regard to the “40 new property insurance writers with more than $4 billion in capital since 2006,” is a statement supporting this report available? Please send me a list of the 40 new property writers licensed here in Florida since 2006 and indicate next to each one the amount of capital attributable to each and the date they were authorized to do business in Florida.

2) To what extent is this capital a function of participation in the state’s Capital Build-Up Program? When preparing the list requested in question #1 please indicate next to each company the amount of their respective participation in the state’s Capital Build-Up Program.

3) For each of the new companies, what is the number of homeowner’s policies in force for each of the calendar years since their respective authorization dates?

4) Are all 40 companies rated, and if so, what are their ratings and by what rating company are they rated (i.e. AM Best, Demotech, or other)?

5) Does the rating company(s) charge a fee for the service?

6) How many of the 40 companies have MGA’s, and what is the limitation on the transfer of assets to a company’s MGA.

7) Are the assets transferred to an MGA isolated from a company’s claims-paying obligations?

Assuming that there is no cause for concern regarding the financial capacity of the new companies, please explain how HB 1171 would be “disruptive” of this new market. Because the rates for the new companies are regulated, one assumes that their rates will be considerably less costly than the dramatic increase you anticipate on the part of the national companies.

You appear to question whether the provision of ‘consumer’s choice’ is one of the basic objectives of the bill. If such is not the case, there is even less possibility for the disruption of the new market. If, on the other hand, as indicated by the enclosed copy of a recent Letter to the Editor of the Florida Times-Union, there is a significant market for unregulated rates by well-capitalized national companies, such will result in the retention of considerable claims-paying capacity. Again, how would this be “disruptive”? Surely, the state needs all the claims-paying capacity we can muster.

One final comment regarding consumer’s choice: you are aware of the transparency provisions provided in House Bill 1171. It is my experience that few policy holders, especially those with Citizens policies, have any idea as to the extent of the assessments for which they could be liable. Most homeowners have little knowledge of the magnitude of Citizens exposure or the limit of its assets. The same applies for the CAT fund. Additionally, some have complained concerning the lack of clarity regarding the “opt-out” procedures when Citizens policies are transferred. To the extent that transparency is a concern, HB 1171 appears to include more explicit provisions than do our current state programs. Do you not agree?

I find it difficult to accept that Citizens, 40 new companies, and what is likely to be a remnant of national companies comprise an adequate homeowner’s insurance program, nor do I believe that such a program can be established in the absence of well capitalized national companies competing on the basis of “market-based” pricing.

In closing, I think we can agree that Florida is a hurricane prone state with the largest coastal build-up in the nation. It seems that our disagreement centers upon my convictions that property insurance rates must be actuarially sound, that reinsurance must be solvent, and that homeowners should be assured of prompt and fair payment of claims. I submit that Florida has neither the capital nor the borrowing capacity to assure the latter.


William L. Proctor

State Representative

District 20



c: The Honorable Charlie Crist


The Honorable Michael S. Bennett

Senator, District 21


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