Insurers brace for start of hurricane season
Homeowners, state face the unknown
By VALERIE WHITNEY, Business Writer
May 12, 2010 12:05 AM
ORMOND BEACH — In less than three weeks, homeowners and insurance companies will be face-to-face with the dreaded time of year — hurricane season.
In preparation for the unknown, officials with Security First Insurance Co. spent time recently testing out a mobile recovery unit parked next door to the firm’s headquarters at 140 S. Atlantic Ave.
The 57-foot-long unit is an air-conditioned office space equipped with a wireless network of computer stations and servers that will allow the company to put its claims operation on-site in the wake of a catastrophe.
“We want to make it as easy as possible for our customers to locate our unit,” said Locke Burt, insurance company president.
“We are here for them and will provide immediate help. This is one of the most important things we can do as their insurance company,” Burt said.
While Security First, which has a capital reserve of about $18 million, is shoring up its claims operation, the state is seeking to make sure all companies can handle their obligations to clients.
State lawmakers then passed legislation during their recent session aimed at curbing the flight of insurance firms from Florida in the wake of several severe hurricane seasons that caused massive damages and left a number of companies bankrupt.
The bill, which still has to be signed by the governor, has a provision that orders a company experiencing financial difficulty to cancel a portion of its business within 45 days, instead of issuing a nonrenewal under the 100 or 180 days currently provided by law.
State Insurance Commissioner Kevin McCarty, who sent a letter to the governor urging him to sign the bill, said his office will continue doing its due diligence to ensure property insurance companies operating in Florida can handle a storm season that could result in severe and frequent storms.
McCarty noted that under current law, insurance companies seeking to do business in the state are required to have a minimum of $5 million capital at the time they are licensed. The change in the law would raise that amount to $15 million for new companies while requiring companies already licensed to raise their surplus to at least $10 million by 2015 and $15 million by 2020.
“These requirements strengthen the solvency of insurance companies and require more capital to be retained within the company where it can be available for the payment of claims,” McCarty wrote.
McCarty has come under criticism for some of his strategies, which include allowing a nearly bankrupt insurer to continue writing policies without warning homeowners. He defended that tactic and others, including letting companies drop unwanted customers and ending requirements that once ensured companies would have the resources to cover even the worst hurricanes.
In early April, the state Office of Insurance Regulation told Florida property insurers they no longer needed the resources to pay for a 1-in-100-year storm, a long-standing standard. The goal, McCarty said, is to reduce insurance costs and keep private insurers in business in Florida’s increasingly fragile market, according to a story that appeared in the Sarasota Herald-Tribune.
Opponents of the Senate bill argue, among other things, that it will allow an automatic rate increase of 10 percent.
McCarty scoffed at the idea, noting rate increases can be implemented only after a review by his office.
“There is noting in this bill that mandates any rate increases,” he said, while acknowledging there is a provision that allows for insurers to recoup costs for reinsurance and inflation in an expedited fashion.
Still, companies seeking to take advantage of this provision must file these changes with the state and it is subject to a review.