By letter dated October 29, 2013, Florida Chief Financial Officer Jeff Atwater inquired with the Florida Office of Insurance (“OIR”) as to why insurance rates have not been reduced for many Florida homeowners given that reinsurers have lowered their rates. Atwater requested a response to the inquiry by December 18, 2013. Florida Insurance Commissioner Kevin McCarty replied that such an analysis was already underway and that he was confident it will be finalized by December 18th.
In his letter, Atwater stated “Year after year, insurance companies have been telling their customers and the Legislature that the ‘simple’ explanation for the higher rates they are charging was due to reinsurance costs going up. Furthermore, they made representations that if reinsurance rates were to fall they would pass those savings along to their customers. But now that insurance companies are experiencing a significant decrease in the cost of their reinsurance, they are not lowering rates for consumers.”
This letter is not the first official inquiry by Atwater. By letter dated August 7, 2013, Atwater implored Commissioner McCarty to explain why “a significant drop in reinsurance costs worldwide has not yet corresponded with a significant drop in property insurance rates for Floridians?”
Commissioner McCarty’s August 9, 2013 response to Atwater’s August 7, 2013 letter stated that, among other reasons, “in a time when reinsurance rates are dropping, an insurance company may choose to purchase more reinsurance,” which “is likely to keep rates up and move additional premium exposure to reinsurers.” This additional coverage, McCarty explained, provides “added protection to ensure claims are paid in a time of a catastrophic event.”
We will continue to follow this story and provide further updates when the OIR analysis is made public.