The Florida House of Representatives Insurance & Banking Subcommittee will hold hearings to review allegations that property and casualty insurers have reported net losses while affiliated entities generated significant profits.
Florida House Speaker Daniel Perez (pictured above) announced the hearings during his opening remarks for the legislative session, citing the importance of property insurance issues.
“A couple of years ago, the insurance industry came to the legislature and said without sweeping reforms companies could not compete in Florida,” Perez said. “We have since learned of reports – in existence at that time but not disclosed to the legislature – that may suggest some insurance companies were using accounting tricks to hide substantial profits while telling us they were in a crisis.”
As per AM Best, Perez also said that the subcommittee will have the authority to subpoena witnesses, place them under oath and hire external experts to assist in the inquiry.
The reference is to a 2022 analysis, first reported by the Tampa Bay Times, which reviewed data from 2017 to 2019.
The analysis noted that following Hurricanes Irma and Michael, several Florida-based homeowners insurance companies reported significant losses, justifying steep rate hikes. However the study revealed that during this period, these insurers paid out $680 million in dividends to shareholders and funneled billions to affiliated companies.
While the insurers themselves showed a net loss of $432 million, their affiliate companies reported a net income of $1.8 billion. This practice has potentially left some insurers financially weaker and less capable of paying out claims.
The Florida Office of Insurance Regulation commissioned the analysis, which reviewed data from 53 insurers. Among those, 41 used managing general agents or attorneys-in-fact to handle policy administration and claims management.
Shiloh Elliott, press secretary for the Florida Office of Insurance Regulation, said the analysis was not considered a formal report or study but rather an internal review.
Among 35 single-state and regional insurers, the analysis determined that 19 had fee structures that could be considered fair and reasonable. Among 18 national insurers, only one had fee structures deemed fair and reasonable.
Mark Friedlander, director of communications for the Insurance Information Institute, said the Tampa Bay Times report relied heavily on cherry-picked information and erroneous data.
There are some consumer advocates and other parties, including a few members of the Florida Legislature that are billboard attorneys who profit off of suing insurers, who continue to push a false narrative that Florida’s man-made risk crisis was not caused by legal system abuse, Friedlander said in an emailed statement.
The review period covered years immediately preceding the collapse of Florida’s property insurance market, when rates increased sharply, some insurers became insolvent and others withdrew from the state. The market disruption led lawmakers to pass regulatory and legal reforms in the years that followed.
Since 2022, Florida has also strengthened its regulatory framework to provide the insurance commissioner with increased oversight of managing general agents, Elliott said.
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