Considering Citizens struggled to meet their reinsurance, as of June 10th insurance journal had an article that said they had only been able to completed 36% so did that change? If not it is even scary to think this is the solution.
The goal is to REDUCE Citizen’s Exposure, not increase it. How does this NOT add to Citizens’ exposure? Just because it’s exposure on the reinsurance end instead of the primary end – DOES NOT mean it isn’t adding to their overall exposure. Make this make sense.
Without this solution many to most of these policies would have moved to Citizens. That would mean Citizens would, in the event of a catastrophe, be paying the losses for the policies that moved to their books, By preserving these companies,, before Citizens pays anything for these policies, first the companies; catastrophe programs will pay and second the companies’ surplus will pay. A rough estimate of the limits in the reinsurance programs of these companies is $10B and their surplus is about another $1B. So, this plan puts $11B between Citizens and paying any losses, where the alternative was pay without any other dollars coming first.
In addition, the time this buys will allow the legislature to take the necessary corrective action that will allow the market to once again function as it should. Having preserved these companies will mean that the reduction in premiums that the legislation will lead to will occur faster as a result of the increased competition that will be the result of more companies being available to compete for the business.
Make sense?
You’re right in that this probably won’t torpedo Citizens since they have built up a sizeable warchest but it doesn’t change the market. Simply shuffling the risk to Citizens and the FHCF is just rearranging the deck chairs on the Titanic. You are also assuming the legislature is going to do anything else. To fix the issue, they’ll have to destroy a very lucrative and firmly entrenched market for lawyers and contractors. These guys won’t go quietly or quickly.
NO – completely disagree with your assumptions the FL Legislature will be able to muster up any significant form of relief. Actuary is dead on below too that this does nothing to reform the market itself.
My money is on this being implemented with the intent of being a near-term solution, but the FL Legislature will live up to their rep, and fail to implement any long-term replacement reforms given the headwinds Actuary cites below.
Real reforms are needed now. Not these near-term solutions designed to appease voters in an election year.
The impediment to more significant reform was/is the speaker of the house, who is himself an attorney. He is not running for reelection. The votes are already there. They just needed to get the speaker out of the way so that the necessary legislation can be brought to the floor. I am not arguing that government works well generally, but when there is something that needs doing in order to get them reelected, it gets done. Though premiums have been rising the last few years, the premium increases at next renewal are going to be so large that a critical mass of homeowners will demand a true fix. Time will tell, but that is how I see implying out. in any event, of the many bad options available to Florida this option is the least bad.
This makes no sense, just let Citizens write the wind for everybody and let the other carriers write an X wind policy. To have a state entity reinsure a private company and some are even public makes me wonder how this is even legal.
How does this impact those directly insured by Citizens? Isn’t a reinsurance arrangement asking them to subsidize the private P&C industry? How does a reinsurance agreement with private insurers affect Citizens’ ability to pay the claims of its direct insureds? Citizens for a number of years now has been trying to shed policies because it does not feel it has the capacity to pay the claims of its direct insureds in the event of a catastrophe–how does this help Citizens to cover its direct exposure?–It doesn’t. This is not innovative, this is nuts.
What a brilliant move, this will save policyholders, agent, companies and mortgage companies from headaches
over the Short Time, BUT if we have a Cat 5 go up the east coast hitting Miami, Ft Lauderdale, Palm Beach and then head across the State to Tampa, this will bring down Citizen and all the so called takeout companies.
Well, if your CAT 5 scenario ever happens, we’ve got bigger problems than what happens to the insurance industry. Florida’s economy and lifestyle would be wiped out. Reminds me of the great quote from Dr. Peter Venkman – “Human sacrifice! Dogs and cats living together! Mass hysteria!”
When reading this article for some reason I thought of the Titanic movie… LOL.
Lawmakers had years of warnings from the industry that this day would come, and now, to see politicians scrambling at the last minute to come up with “solutions”, is just crazy. But unfortunately, no amount of “creative” loopholes will save the industry, only postpone the inevitable. One way or the other, the Titanic is sinking.
This is essentially nationalizing (staterizing?) these companies. If Citizens, and by extension the FL taxpayers, are assuming all risk excess of the company’s surplus, why bother having independent companies? Just absorb the surplus into Citizens’ piggybank and cut out the middleman.
I understand that this is the best solution for policyholders in the short-term to get everyone through the few months but what’s going to happen in 3 months or 6 months. None of these solutions impact the underlying economics of the FL market.
Meanwhile, back at the ranch, the attorney and contractor lobby will try to codify their revenue scheme being funded by tax payer dollars. All in the name of “Justice”.
What about the insurance agents. Almost all E & O polices only allow A rated carriers! How about limiting attorney fees. Maybe start by not allowing multiplies. I never understood why they should be paid above the hourly rate.
Wasn’t there a recent article about how Citizens hasn’t been able to place 70% of their required reinsurance? Do any of the regulators and politicians know how Assessments work (FL Statutes 627.351)? If there is a significant storm season, what will be their creative solution then?
Does this encourage companies that should be in liquidation to continue writing, knowing that between FIGA and Citizens, they are free to write with no concern for claims not being paid. And until the plug is finally pulled, management can take salaries and TPA expenses to their own pockets. As noted, the Florida market has been converted into the Titanic, and the Florida regulatory authorities have just declared themselves responsible for the placement of the deck chairs…wonder what the taxpayers think of this?
Florida will no doubt soon be passing a new law declaring “insolvency” to be on par with “gay” or “transexual” and the teaching of actuarial science and insurance finance to be banned from government offices and public and private school in Florida.
So the policies, practices, pricing, underwriting discipline (or lack thereof) contributed to impending downgrades.
Citizens writing a cut-through – with no due diligence, change or oversight of any of the above?
Just the 17, seems a bit unfair to others.
Why wouldn’t the 17 lock rates (and values) as expiring and start writing new business as fast as they can?
Well once again the Legislature has missed it’s “Profiles in Courage ” moment and kicked the can down the road. Citizens does not have the capacity to pay it’s current risks much less take on the risk of the other companies. Citizens is basically saying it will cover claims with an “IOU”. While a downgrade would cause chaos in the FL market, that is what is needed to force the hand of the legislature to finally address the issues at hand as well as revise some very poorly written laws.
Petrelli is shining a light on the elephant in the room. Demotech is not responsible for the catastrophic conditions in the property market in Florida, that blame is owned 100% by the Florida legislature. Demotech did not create the AOB abuse situation impacting every single property carrier in Florida. Demotech did not create special loopholes for their friends in the legal industry. The Florida property market is in a downward spiral. The Florida Legislature must:
1. Find a workable solution to the AOB abuse.
2. Create an arbitration process for lawsuits against insurers in property claims disputes.
3. Impose mandatory fines and mandatory prison time on unethical roofers including permanent revocation of their license to do business in the state of Florida.
4. Create public service announcements to educate Florida consumers. Teach them to vet a roofer before the roofer is hired. Ethical roofing companies suffer when bad roofers are left unchecked
Demotech did not take action against these insurers until the special session of the Florida legislature failed to act. Demotech waited, allowed Florida time to make corrections in the property market and we failed. This is one time where I must respectfully disagree with FAIA. Florida placed 27 insurers on a watchlist, Demotech took action against 17 of those insurers.
Now the short-term easy fix is to saddle an already overburdened Citizen’s with even more responsibility?
If the legislature is incapable of acting, Gov. DeSantis should appoint Jim Boyd to a special committee and allow him to handpick insurance professionals to draft legislation for consideration and approval by the legislature. Please, we cannot afford to make the same mistakes we made during the PIP fiasco. Bring in subject matter experts, such as Lisa Miller, and solve our property market crisis once and for all. We’re out of time, decisions must be made, action must be taken, haven’t we kicked the can down the road long enough?
So basically, the “citizens” of Florida, like me, are going to subsidize most of the state’s private property insurance company losses. In addition, we will subsidize all the losses from Citizens Property and Casualty Corp., the Florida CAT fund AND the Florida Insurance Guaranty Association (FIGA) by way of fees levied through our own insurance policies to cover losses of insolvent carriers. I’m beginning to think that Newsweek Magazine was right with their cover headline in 2009 “We Are All Socialists Now”.
The Florida property market has always been a house of cards waiting for a breeze. This is what happens when you over-build on a sandbar and expect carriers to take it in the shorts year after year. The wind is going to blow. Something has to give. I’m glad I don’t have a dog in this fight. We write no Florida property so I sleep well June to November. Let the political games begin! SPOILER ALERT: You know that the Feds will ride to the rescue on their white horse in an election year. Not a bad strategy to win the Florida vote.
They have 3 billion in reserves and 13 Billion in liability get out of here with all this non-sense. If something happens we all already on the hook as home owners don’t make it worse and to the Senator that suggested giving the carriers the 3 billion in reserves to hopefully keep the other carriers in business, you sir are the definition of stupid. If you cant do math please buy a calculator.
Considering Citizens struggled to meet their reinsurance, as of June 10th insurance journal had an article that said they had only been able to completed 36% so did that change? If not it is even scary to think this is the solution.
This is insanity.
The goal is to REDUCE Citizen’s Exposure, not increase it. How does this NOT add to Citizens’ exposure? Just because it’s exposure on the reinsurance end instead of the primary end – DOES NOT mean it isn’t adding to their overall exposure. Make this make sense.
Without this solution many to most of these policies would have moved to Citizens. That would mean Citizens would, in the event of a catastrophe, be paying the losses for the policies that moved to their books, By preserving these companies,, before Citizens pays anything for these policies, first the companies; catastrophe programs will pay and second the companies’ surplus will pay. A rough estimate of the limits in the reinsurance programs of these companies is $10B and their surplus is about another $1B. So, this plan puts $11B between Citizens and paying any losses, where the alternative was pay without any other dollars coming first.
In addition, the time this buys will allow the legislature to take the necessary corrective action that will allow the market to once again function as it should. Having preserved these companies will mean that the reduction in premiums that the legislation will lead to will occur faster as a result of the increased competition that will be the result of more companies being available to compete for the business.
Make sense?
You’re right in that this probably won’t torpedo Citizens since they have built up a sizeable warchest but it doesn’t change the market. Simply shuffling the risk to Citizens and the FHCF is just rearranging the deck chairs on the Titanic. You are also assuming the legislature is going to do anything else. To fix the issue, they’ll have to destroy a very lucrative and firmly entrenched market for lawyers and contractors. These guys won’t go quietly or quickly.
NO – completely disagree with your assumptions the FL Legislature will be able to muster up any significant form of relief. Actuary is dead on below too that this does nothing to reform the market itself.
My money is on this being implemented with the intent of being a near-term solution, but the FL Legislature will live up to their rep, and fail to implement any long-term replacement reforms given the headwinds Actuary cites below.
Real reforms are needed now. Not these near-term solutions designed to appease voters in an election year.
The impediment to more significant reform was/is the speaker of the house, who is himself an attorney. He is not running for reelection. The votes are already there. They just needed to get the speaker out of the way so that the necessary legislation can be brought to the floor. I am not arguing that government works well generally, but when there is something that needs doing in order to get them reelected, it gets done. Though premiums have been rising the last few years, the premium increases at next renewal are going to be so large that a critical mass of homeowners will demand a true fix. Time will tell, but that is how I see implying out. in any event, of the many bad options available to Florida this option is the least bad.
This makes no sense, just let Citizens write the wind for everybody and let the other carriers write an X wind policy. To have a state entity reinsure a private company and some are even public makes me wonder how this is even legal.
How does this impact those directly insured by Citizens? Isn’t a reinsurance arrangement asking them to subsidize the private P&C industry? How does a reinsurance agreement with private insurers affect Citizens’ ability to pay the claims of its direct insureds? Citizens for a number of years now has been trying to shed policies because it does not feel it has the capacity to pay the claims of its direct insureds in the event of a catastrophe–how does this help Citizens to cover its direct exposure?–It doesn’t. This is not innovative, this is nuts.
What a brilliant move, this will save policyholders, agent, companies and mortgage companies from headaches
over the Short Time, BUT if we have a Cat 5 go up the east coast hitting Miami, Ft Lauderdale, Palm Beach and then head across the State to Tampa, this will bring down Citizen and all the so called takeout companies.
Well, if your CAT 5 scenario ever happens, we’ve got bigger problems than what happens to the insurance industry. Florida’s economy and lifestyle would be wiped out. Reminds me of the great quote from Dr. Peter Venkman – “Human sacrifice! Dogs and cats living together! Mass hysteria!”
When reading this article for some reason I thought of the Titanic movie… LOL.
Lawmakers had years of warnings from the industry that this day would come, and now, to see politicians scrambling at the last minute to come up with “solutions”, is just crazy. But unfortunately, no amount of “creative” loopholes will save the industry, only postpone the inevitable. One way or the other, the Titanic is sinking.
This is essentially nationalizing (staterizing?) these companies. If Citizens, and by extension the FL taxpayers, are assuming all risk excess of the company’s surplus, why bother having independent companies? Just absorb the surplus into Citizens’ piggybank and cut out the middleman.
I understand that this is the best solution for policyholders in the short-term to get everyone through the few months but what’s going to happen in 3 months or 6 months. None of these solutions impact the underlying economics of the FL market.
I agree 100% with “Actuary’s” comment
Meanwhile, back at the ranch, the attorney and contractor lobby will try to codify their revenue scheme being funded by tax payer dollars. All in the name of “Justice”.
What about the insurance agents. Almost all E & O polices only allow A rated carriers! How about limiting attorney fees. Maybe start by not allowing multiplies. I never understood why they should be paid above the hourly rate.
Wasn’t there a recent article about how Citizens hasn’t been able to place 70% of their required reinsurance? Do any of the regulators and politicians know how Assessments work (FL Statutes 627.351)? If there is a significant storm season, what will be their creative solution then?
Or we could eliminate FS 627.428 and solve all the problems. This just about how can we move money from Florida homeowners to Florida attorneys.
Does this encourage companies that should be in liquidation to continue writing, knowing that between FIGA and Citizens, they are free to write with no concern for claims not being paid. And until the plug is finally pulled, management can take salaries and TPA expenses to their own pockets. As noted, the Florida market has been converted into the Titanic, and the Florida regulatory authorities have just declared themselves responsible for the placement of the deck chairs…wonder what the taxpayers think of this?
Florida will no doubt soon be passing a new law declaring “insolvency” to be on par with “gay” or “transexual” and the teaching of actuarial science and insurance finance to be banned from government offices and public and private school in Florida.
So the policies, practices, pricing, underwriting discipline (or lack thereof) contributed to impending downgrades.
Citizens writing a cut-through – with no due diligence, change or oversight of any of the above?
Just the 17, seems a bit unfair to others.
Why wouldn’t the 17 lock rates (and values) as expiring and start writing new business as fast as they can?
Well once again the Legislature has missed it’s “Profiles in Courage ” moment and kicked the can down the road. Citizens does not have the capacity to pay it’s current risks much less take on the risk of the other companies. Citizens is basically saying it will cover claims with an “IOU”. While a downgrade would cause chaos in the FL market, that is what is needed to force the hand of the legislature to finally address the issues at hand as well as revise some very poorly written laws.
Petrelli is shining a light on the elephant in the room. Demotech is not responsible for the catastrophic conditions in the property market in Florida, that blame is owned 100% by the Florida legislature. Demotech did not create the AOB abuse situation impacting every single property carrier in Florida. Demotech did not create special loopholes for their friends in the legal industry. The Florida property market is in a downward spiral. The Florida Legislature must:
1. Find a workable solution to the AOB abuse.
2. Create an arbitration process for lawsuits against insurers in property claims disputes.
3. Impose mandatory fines and mandatory prison time on unethical roofers including permanent revocation of their license to do business in the state of Florida.
4. Create public service announcements to educate Florida consumers. Teach them to vet a roofer before the roofer is hired. Ethical roofing companies suffer when bad roofers are left unchecked
Demotech did not take action against these insurers until the special session of the Florida legislature failed to act. Demotech waited, allowed Florida time to make corrections in the property market and we failed. This is one time where I must respectfully disagree with FAIA. Florida placed 27 insurers on a watchlist, Demotech took action against 17 of those insurers.
Now the short-term easy fix is to saddle an already overburdened Citizen’s with even more responsibility?
If the legislature is incapable of acting, Gov. DeSantis should appoint Jim Boyd to a special committee and allow him to handpick insurance professionals to draft legislation for consideration and approval by the legislature. Please, we cannot afford to make the same mistakes we made during the PIP fiasco. Bring in subject matter experts, such as Lisa Miller, and solve our property market crisis once and for all. We’re out of time, decisions must be made, action must be taken, haven’t we kicked the can down the road long enough?
You are, of course, right. But, don’t hold your breath….
So basically, the “citizens” of Florida, like me, are going to subsidize most of the state’s private property insurance company losses. In addition, we will subsidize all the losses from Citizens Property and Casualty Corp., the Florida CAT fund AND the Florida Insurance Guaranty Association (FIGA) by way of fees levied through our own insurance policies to cover losses of insolvent carriers. I’m beginning to think that Newsweek Magazine was right with their cover headline in 2009 “We Are All Socialists Now”.
The Florida property market has always been a house of cards waiting for a breeze. This is what happens when you over-build on a sandbar and expect carriers to take it in the shorts year after year. The wind is going to blow. Something has to give. I’m glad I don’t have a dog in this fight. We write no Florida property so I sleep well June to November. Let the political games begin! SPOILER ALERT: You know that the Feds will ride to the rescue on their white horse in an election year. Not a bad strategy to win the Florida vote.
Sounds more like a game of hot potato rather than an “elegant solution”.
They have 3 billion in reserves and 13 Billion in liability get out of here with all this non-sense. If something happens we all already on the hook as home owners don’t make it worse and to the Senator that suggested giving the carriers the 3 billion in reserves to hopefully keep the other carriers in business, you sir are the definition of stupid. If you cant do math please buy a calculator.