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Old 05-03-2007, 05:18 PM
DW Simpson DW Simpson is offline
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Default No more Florida-only subsidiaries bill passes Florida Senate

http://cms.nationalunderwriter.com/c...7/05/03-fla-st

Quote:
Fla. Senate Okays Ban On New Insurer Subsidiaries
BY STEVE TUCKEY
NU Online News Service, May 3, 1:25 p.m. EDT

A bill banning future Florida-only insurer subsidiaries and expanding the scope of coverage by Citizens, the state-created carrier, passed the Florida State Senate yesterday.

Passed by a unanimous vote, the bill, which is opposed by the insurance industry, was sent on to the House. It would also require national insurers with in-place subsidiaries to disclose their overall profits when requesting a rate hike in Florida.

More...
These folks are geniuses.
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Old 05-03-2007, 10:53 PM
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heh ... Will the last insurer to leave Florida please turn out the lights?
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Old 05-04-2007, 09:13 AM
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I have a bit of an idea of what this is about, but could someone please explain the significance of this. What is the main purpose of setting up a Florida only subsidiary? Is this practice unique to Florida?
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Old 05-04-2007, 09:23 AM
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Quote:
Originally Posted by Polly Nomial View Post
I have a bit of an idea of what this is about, but could someone please explain the significance of this. What is the main purpose of setting up a Florida only subsidiary? Is this practice unique to Florida?
It's not entirely unique to Florida, no, but it's probably where it's most common.

There are 2 purposes, the first of which is the biggest in most cases:

(1) Protection of Surplus: If Insurance Company of America (ICA) writes Florida HO, obviously they are putting their surplus at risk. If they create Homeowners Insurance Company of Florida (HICF), they can put the minimum amount of capital needed in the sub to capitalize it to write the amount of business they want, and if it goes broke, the parent companies surplus is not in jeopardy. The can just let the sub go into receivership if they decide not to recapitalize it.

(2) Ability to Withdraw: Many "difficult" states have a requirement that if a company withdraws from a "problem" line (like FL HO), they must withdraw from ALL lines in that state. If Insurance Company of America has a profitable Florida Auto book and writes HO in ICA, then the regulator can use the auto book as leverage to keep them from leaving. If they write only HO in HICF, then withdrawing may not affect the ICA auto book.
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Old 05-04-2007, 10:11 AM
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Thumbs down Sounds like Secession

Quote:
Originally Posted by D.W. Simpson Webmaster View Post
Fla. Senate Okays Ban On New Insurer Subsidiaries BY STEVE TUCKEY NU Online News Service, May 3, 1:25 p.m. EDT

A bill banning future Florida-only insurer subsidiaries and expanding the scope of coverage by Citizens, the state-created carrier, passed the Florida State Senate yesterday.

Passed by a unanimous vote, the bill, which is opposed by the insurance industry, was sent on to the House. It would also require national insurers with in-place subsidiaries to disclose their overall profits when requesting a rate hike in Florida.
Let me see if I have this right:

1) A new Florida insurer cannot have a non-Florida parent. So only Florida investors can start a Florida-only company.

2) If national insurers must disclose overall profits to get rate hikes in FL-only subs, it appears FL will try to require out-of-state policyholders to subsidize the FL rates. If I were on the board, I'd drop FL policies as fast as possible. No new risks either. Insurance depts in the parents' domiciliary states should be protecting their domestic companies by encouraging such a response.
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Old 05-04-2007, 10:48 AM
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In addition to MH's correct response (this is sort of #2 from JMO Fan, but not exactly): states just require payments if you withdraw and then regulate ridiculously low premiums - you can't leave, so why would thhey let you charge market rate, that's not getting them re-elected - and the insurance companies get screwed (and then pass the screwing on to insureds in other states and investors). If you make a separate company that doesn't have access to the parent's capital, the result of the state DOI mandating ridiculously low premiums is the company goes under, making the DOI look bad. So, to some extent it's a control on the DOI. This is a secondary benefit to doing the company in Florida (because in FL, the problem is "the big one", not just generally low rates continuously mandated - they're related, but separate, issues), but the main reason some companies have a separate company for NJ auto.

I didn't check, but I think Allstate has two separate subs - Allstate Floridian (has all the property risk, does not have the auto), and Allstate NJ, which I believe has everything for NJ. This is probably comparable to what other companies are doing.

Last edited by Westley; 05-04-2007 at 10:52 AM..
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Old 05-04-2007, 11:04 AM
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Bill also does not allow Citizens to raise rates until 2009. Is Crist running for re-election in 2008?
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Old 05-04-2007, 12:38 PM
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Default Crist vs. Sink vs. McCarty

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Bill also does not allow Citizens to raise rates until 2009. Is Crist running for re-election in 2008?
Not 'til 2010 -- 2009 is bad timing for Crist.
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Old 05-07-2007, 12:06 PM
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Thanks MountainHawk and Westley.

I get it now! Pretty dumb, but not surprising.
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Old 05-10-2007, 09:39 AM
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Even some of the press is skeptical:
Quote:
Commentary: Crist's Magic Won't Eliminate Insurance Woes Mike Thomas
Copyright 2007, Orlando Sentinel Communications. All Rights Reserved.

You put the nail in the coffin this afternoon on the industry that was hurting our people, and that's right and just and fair and important and you did it. God bless you for fighting for the people of Florida.

That was Charlie Crist talking to lawmakers about property insurers.

He will slay them.

He will point his amazing shrinking ray at their rates.

He will take something that is worth a dollar and magically force them to sell it for 50 cents.

That years of history have demonstrated the folly in this is immaterial. What's important is that Charlie's poll numbers are at 70 percent.

Here is reality: Before Hurricane Andrew, private insurers competed by keeping rates low. After Andrew 11 of them went bankrupt, and the others suffered huge losses.

Given that reality check, insurers began raising rates and dropping policies. There was an uproar. The problem with cheap insurance is that it can become an entitlement program.

And the problem with government is that it thinks it can make reality go away by passing laws.

Back in 2002 lawmakers passed a law to create Citizens Property Insurance.

We were told this state-run bureaucracy could accomplish the miracle of selling more for less.

Of course, then came the hurricanes of 2004 and 2005. Like so many insurers before it, Citizens went bankrupt -- at least until we all got taxed to bail it out.

After that experience, Citizens Property began doing what the private insurers did. It started raising rates to match the level of its risk.

Homeowners screamed.

Their rates have been suppressed for so long, people think the adjustment to reality is a devious plot to rip them off.

It doesn't matter that insurance companies here continue to go bankrupt, continue to shed policies and continue to flee Florida. It doesn't matter that twice Citizens has been bailed out by taxpayers.

And now comes Charlie, feeding into this by peddling his simple morality play of good governor versus evil insurers.

The evidence is too overwhelming for even him to pretend that insuring property in Florida is profitable.

So now he basically wants insurers to subsidize premiums here by tapping the pockets of their policyholders in other states.

He has pushed through a rate freeze for Citizens Property, while turning it loose to expand and compete with private insurers.

How can a State Farm compete with that? When Citizens goes bankrupt because of its cheaper rates, it simply raises taxes on State Farm's customers.

Citizens Property is the problem. And so now the solution is to expand our way out of it by making Citizens even bigger?

What next? Will Citizens start selling car insurance to subsidize its homeowner's insurance? Will it start offering million-dollar umbrella policies?

The logical conclusion of expanding Citizens Property while discounting its rates is that eventually there will be only Citizens Property.

Meanwhile, the coastal condos continue to rise because developers can get cheap insurance.

We have taken risk that once was spread across the global insurance market and are concentrating it here.

When the next hurricanes arrive, Florida will go billions into debt. The more we suppress rates for the benefit of Charlie's poll numbers, the greater the debt. And the greater the tax increase we will face to pay for it.

This is not a maybe or an if.

It is a when.
http://www.orlandosentinel.com/news/...0,39259.column

Sorry, Charlie.
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