Insurance Claims And Issues

Thanks for the Insurance and Your Service, Citizen Douglas!

     Thursday, July 31, 2008 is the last day that Mr. Bruce Douglas will serve as the Chair of Citizens Property Insurance Corporation.  Reportedly, Citizens is the largest Homeowner's Insurance Company in the United States that operates as an arm of State Government, and in this case, the State is Florida.

     Citizens also reportedly has 1,200,000 or 1.2 Million Policyholders.  In the 6 years that Mr. Bruce Douglas has been the Citzens Chair, "its exposure to storm damage" has more than doubled, "to $425-billion, but reserves have been rising, thanks to no recent storms."  Mr. Douglas is virtually everyone's dictionary definition of a fine human being.  His public service has been performed with honor.  Consistent peformance of his duties with honor, and a good sense of humor rarely found in those in modern public life, are both on display in this interview by Tom Zucco, "He Leaves Citizens More Stable" (St. Petersburg Times Online, Friday, July 25, 2008).

     Thank you, Bruce Douglas.

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Florida O.I.R. Lifted Suspension of New Allstate Policies...

... The Same Day Florida's First District Court of Appeal Denied Rehearing of its Opinion Upholding O.I.R.'s Order Suspending New Allstate Policies.

     Press reports published on Saturday, May 17, 2008 made it appear that the Florida Office of Insurance Regulation (O.I.R.) lifted its suspension on new Allstate Insurance Policies on Florida on the day before, or Friday, May 16, 2008.  As you will recall, the O.I.R. issued its Suspension Order in the first place because Allstate failed to comply with O.I.R. subpoenas for various groups of documents including unauthorized Catastrophe Computer Models purchased by Allstate in connection with its Premium Rate Increase requests.

     According to the O.I.R., it announced a stay of its Suspension Order on Wednesday, May 14, 2008, immediately after the Florida appellate court denied rehearing of its Opinion upholding the O.I.R. Order.  The reason given by the O.I.R. was its receipt of a sworn affidavit from Allstate "certifying that it has complied with Florida law by freely providing all documents requested" by the O.I.R.  See Florida Office of Insurance Regulation Press Release, "Florida Insurance Commissioner McCarty Stays Allstate Suspension, Continuing Compliance Required," Wed., May 14, 2008.

     Dennis Wall, Chair of the Insurance Law Committee, will speak at the Orange County Bar Association Center in Orlando, Florida about Preparing for Hurricane Insurance, on Wednesday, May 21, 2008 from Noon to 1:00 P.M.  The Orange County Bar Association Center is located at 880 North Orange Avenue in Orlando, Florida.

    You are cordially invited to attend this free public event.  Hope to see you there. 

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Preparing for Hurricane Insurance.

    Dennis Wall, Chair of the Insurance Law Committee, will speak at the Orange County Bar Association Center in Orlando, Florida about Preparing for Hurricane Insurance, on Wednesday, May 21, 2008 from Noon to 1:00 P.M.  The Orange County Bar Association Center is located at 880 North Orange Avenue in Orlando, Florida.

    You are cordially invited to attend this free public event.  Here  is a link to the "EVENTS" published about this presentation by the Orlando Sentinel on Monday, May 19, 2008 on page C3, col. 1, in "The Law & You" Section.

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Property Insurance and the Florida Legislature: Reforms or Risks?

    Property Insurance is a focus of the 2008 Florida Legislature.  This is not always to the good, according to an editorial on the subject in an influential Florida newspaper, "Insurance Risks Still Looming" (St. Petersburg Times Online, Thursday, March 27, 2008).

    The editorial highlights many areas of interest addressed by various bills passed or pending in the Florida Senate.  Some of these areas of interest are shared in varying degrees by the Florida House of Representatives and by other State officials such as Florida's current Chief Financial Officer.  Some were put in place by the 2007 Special Session of the Florida Legislature; some are new.  Here are the more significant areas of interest addressed in the editorial:

• Expanding Citizens Property Insurance Corporation.  Citizens is a public corporation owned by the Taxpayers of Florida.  A Senate bill, according to the editorial, would allow Citizens to issue Insurance Policies "insuring homes worth $1-million or more."
• Extending the current rate freeze through 2009.
• Providing incentives through "a $250-million state incentive program" for private Insurance Companies to remove and take over the risk on  Insurance Policies on which Citizens is currently on the risk.
• Reduce Florida's exposure to Reinsurance risk.
• "[R]esponsibly reduce exposure with both the CAT fund and Citizens, which can each assess policyholders when they run deficits."

Time, Hurricanes, the Florida Legislature, and Florida State officials will determine the outcome of these and other proposals.  That is, if there is enough Time.  And whether there is another Year of Hurricanes in Florida.  Much remains to be seen.

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Storm Clouds in Florida: Legislature Divided Over Rollback, Writedowns.

   The current credit crunch and crisis, problems with issuing and insuring the payment of Bonds, and at least one of the questioned credit rating corporations used in the Insurance industry, have recently made appearances together in the Florida Capitol.

   The current credit crunch has appeared together with the specter of a failure in the market for Florida Bonds.  "In light of the troubled housing and credit markets, state leaders have expressed doubt that they'd be able to sell $27 billion in bonds needed to pay storm claims if a Katrina-sized hurricane hit a major population center in Florida."  Julie Patel, "State Legislators Say Property Insurance Law Has Deep Flaws" (South Florida Sun-Sentinel.com, 10:24 PM EDT, Monday, March 24, 2008). 

   In addition, embattled credit rating company Fitch Ratings just issued a timely report.  In its report, Fitch reportedly takes the position that Homeowner's Insurance Coverage would "'effectively collapse'" if there is a Hurricane in Florida in 2008.  The Fitch report comes just as the Florida Legislature is debating whether to writedown and rollback, or extend, the emergency laws it passed in Special Session in January, 2007.

   A majority in the Florida Senate reportedly is in favor of extending and expanding the 2007 Special Laws on Hurricane Insurance.   For example, a majority of the Florida Senate reportedly supports extending a moratorium on Premium Rate Increases by Citizen's Property Insurance Company.  The moratorium or "freeze" on Rate hikes is due to expire on January 1, 2009.    Citizen's is owned and operated on behalf of Florida Taxpayers as a State agency offering circumscribed Homeowner's and other Property Insurance Coverages.  That its offerings became suddenly more popular in 2006 and 2007 was taken then as a sign of a desperate Homeowner's and Property Insurance Market in Florida.

   On the other hand, a present majority in the Florida House of Representatives reportedly opposes extending the moratorium on Citizen's Property Insurance Premium increases.  Further, a majority in the Florida House is reported to support "scaling back the catastrophe fund" that the Florida Legislature rushed into place in its 2007 Special Session.

   More to come in the struggle among and between Premium Rate Increases and the availability of credit, the performance and issuance of so-called Municipal Bonds such as the Florida Bonds in question in the Florida Capitol, and the very existence and availability of Homeowner's Insurance Coverage in Florida.

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Shopping For Alternative Home and Property Insurance.

   Surplus Lines and Condominium Windstorm Self-Insurance Trusts are reported by Julie Patel, in "South Floridians Turn to Alternative Home Insurance" (South Florida Sun-Sentinel.com, Monday, March 10, 2008).  This report is a potentially useful survey of alternatives for Homeowner's and other forms of Property Insurance Coverage in Florida.  The same is true of this handy reference of critical questions to ask regarding Surplus Lines Insurance and regarding Self-Insurance Trusts:  "Do Your Homework on Insurance Carriers" (South Florida Sun-Sentinel.com, Monday, March 10, 2008).

   Similar alternatives can be explored in other places where you or those you represent may be interested.

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Municipal and Other Bond Insurance Issues Affect Government Budgets.

    Many issues affect the issuance of municipal and other local government Bonds at the present time.  The rapidly descending financial ratings of some Bond Insurance Companies is only one of those issues.  Declining tax revenues is another, major issue.  See generally Joe Mysak, "Buffett Plan Saves Muni Market, Dooms Ambac, MBIA" (Bloomberg.com, Wed., February 13, 2008).

    In Florida, a great reduction of local government tax revenues was recently passed by a referendum that was understandably advertised as lowering property taxes.  Jennifer Liberto, "Property Tax Relief Makes Bonds Costly/Higher Rates Can Cost Millions in Interest" (St. Petersburg Times Online Corrected Feb. 9, 2008 Report).   Now, even the availability and purchase of Insurance by municipalities and other local governments may be in peril due to the effects of lowered tax revenue to support the prospects that if these local governments issue bonds now, that they will pay them back later, or ever.

    Questions about Fiduciary Duties of Bond Insurance Companies, or not, are arising at this time as well.  Some of those questions are posted on Insurance Claims And Bad Faith Law Blog, linked here.

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Another, Third Alternative to Bond Insurance at Risk.

    Reinsurance is another alternative to having Bond Insurance Policies and their Coverages currently at risk.  The current risk is not due to pending claims but instead to falling credit ratings of some Bond Insurance Companies.  The Bond Insurance Companies that issued the existing Policies also made other investments that have gone south.

     The "gone south" other investments have affected the Bond Insurers' financial ratings for the worse, not municipal or other local government bonds.  The local government bonds remain as safe as they ever were, and as profitable to insure.

    It should not be difficult to attract  Reinsurance now, to  provide present Coverage to Bond Insurance Companies for theoretically possible future losses on municipal and other local government  bonds (losses that based on past experience, the foundation of Underwriting, may never happen).  That would clearly seem to prevent the Bond Insurance Policies and their Coverages from being at risk.   That would also be an alternative to a "bailout" whether private or public funds are suggested.  See generally Tomoeh Murakami Tse, "Buffett Unveils Proposal to Bail Out Bond Insurers/Investor Would Insure Firms' Healthy Municipal Portfolios" (washingtonpost.com, Wed., February 13, 2008).

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Florida to Fund Reinsurance Less, Promoting Private Re and Rise in Premiums.

   The Chief Financial Officer of Florida has a reported plan to "force insurers to purchase more insurance from the private market," rather than from the State of Florida.  (Previous reports reflected that the large insurers were not purchasing their Reinsurance from the State because their parent corporations purchased Reinsurance for them, on the so-called private market.)  The office of the CFO is said to point out that private Reinsurance Premiums have actually dropped. 

   A spokesperson for State Farm Florida, however, suggests that other Premiums will increase if Homeowner's and other Property Insurance Companies can only buy Reinsurance from Reinsurance Companies.  Jennifer Liberto, "Reinsurance Rehab on Table/CFO Sink Wants to Lower Florida's Exposure" (St. Petersburg Times Online, Fri., Feb. 8, 2008).

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Sigma 2005 and 2006 Results From Swiss Re.

    Swiss Re has released "sigma" results for 2005 and, tentatively, for 2006 to date.  "Sigma" is the Greek codeword used by Swiss Re to identify its computer-based reports.  A link to both reports, released separately by Swiss Re, is here.   The information is revealing.  Here is some of it.

2005

    Total Insurance Policy Premiums in 2005 were $3,426,000,000.00 or 7.7 % of the World's "Gross Domestic Product".  About 56 percent of Insurance Premiums are for Life Insurance.  There is a definite link to commerce here.   Swiss Re notes further that "the growing loan market generated more mortgage-related life insurance policies."  The rest of the Premiums went to pay for what Swiss Re categorizes as "non-life" Insurance Policies.

2006

    So far in 2006, Swiss Re's computer results reveal the third-lowest "insured losses" in the last 2 decades.  The "loss events" studied by Swiss Re's computers show that this year, typhoons and earthquakes predominated among the Catastrophe list and they "hit mainly newly industrialising countries where insured losses are relatively low."  The irreplaceable loss of Life to Catastrophes appears to be proportionately higher than Property Losses to date.  The role of Insurance available to relieve worldwide Catastrophes in 2006 is not necessarily great, it appears.

    Economic losses worldwide in 2006, Swiss Re says, total $40,000,000.00 and so far $15,000,000.00 or 37.5% "were actually covered by insurance."  There is no word on how if at all, the remaining 62.5% or $25,000,000.00 of economic losses is and are addressed in the countries where this year's Catastrophes have struck.

    Remembering to give thanks for our blessings, and remembering to remember those who may not be as fortunate,  Happy Holidays to All!

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.