As the lack of affordable property insurance reaches crisis proportions in Florida, bankers there are pressing for legislative solutions.
“There are no companies willing to underwrite insurance,” said Jose Valdes-Fauli, the president and chief executive officer of the $120 million-asset Beach Bank in Miami Beach. “And if they do, the cost is so prohibitive that individuals, businesses, or commercial property [owners] can’t afford it.”
The lack of affordable insurance is the biggest challenge now facing banks in the state, Mr. Valdes-Fauli said. “You can’t make a loan without insurance.”
Florida bankers are following in the footsteps of colleagues in Louisiana. Bankers there said insurance policies became scarce or expensive in the aftermath of hurricanes Katrina and Rita, and they took their complaints to Capitol Hill. Last week an official from the Louisiana Bankers Association met with Rep. Richard Baker, R-La., in Baton Rouge to discuss the issue.
Congress has appropriated funds to help communities hit by the hurricanes, but it has not established a long-term program to address the effects that natural disasters have on the insurance markets.
Insurers, suffering from back-to-back seasons of damaging hurricanes, are trying to limit their exposure in both states.
In Florida, some large insurers are shedding customers. Allstate Corp., for example, has reduced its policy count there by nearly a third since the spring of last year, to 530,000, by transferring policies to smaller companies.
Other companies have jacked up their premiums. Florida’s Office of Insurance Regulation recently approved an average increase of 53% in the premiums charged by State Farm Insurance Co., and a proposed average increase of 71% by Nationwide Mutual Insurance Co. is pending, said Bob Lotane, a spokesman for the agency.
As a result of both pullbacks and higher premiums, Citizens Property Insurance Corp., the state-run insurer of last resort, is now the largest insurer in the state, with more than 1 million policies on its books, Mr. Lotane said.
To tackle the increasingly troubling situation, the Florida Association of Insurance Agents held a meeting Monday that pulled together high-level representatives from a slew of industries, including real estate, banking, home building, insurance, and mortgage banking.
Jeff Grady, the insurance agents group’s president and CEO, would not identify the people who attended the meeting, except to say that 25 CEOs were on hand.
The Florida Bankers Association is planning a similar summit for Sept. 14 in Tampa. It is expected to draw about 40 bankers, as well as banking and insurance regulators, insurance industry representatives, and officials from the state-run insurer. “We’re going to hear from all these folks and see what solutions we can come up with,” said Alex Sanchez, the president and CEO of the Florida Bankers Association.
Mr. Grady said the presence of so many high-level officials at his meeting reflects the growing realization that the insurance situation in Florida is “of crisis proportion.” The high turnout also demonstrates “an apparent strong willingness to work together quickly to put together a proposal that lawmakers could get a chance to hear, understand, and hopefully pass.”
The situation has already affected home sales, he said. “If Florida doesn’t get a handle on this insurance situation, we’re going to wake up to an economy that shows that people are moving away from here.”
But the people who attended the meeting failed to reach a consensus, he said; some argued that higher insurance rates were needed, and others urged more government involvement.
One way for the government to help would be to increase the capacity of the Florida Hurricane Catastrophe Fund, which reimburses insurers for some of the losses they incur as a result of catastrophic storms, Mr. Grady said.
The fund currently has $15 billion, but at Monday’s meeting, the group came up with more than 200 scenarios that each could cause more than $100 billion of damage in the state, he said.
“Our current capacity” in the fund “can’t even begin to stomach that,” Mr. Grady said.
A delegation of Florida bankers traveled to Washington recently to meet with the state’s lawmakers about the insurance situation, including three Republicans: Sen. Mel Martinez and Reps. Adam Putnam and John Mica.
The bankers support the Homeowners Insurance Protection Act of 2005, a bill introduced in November by two other Florida Republicans, Reps. Ginny Brown-Waite and Clay Shaw, that would establish a federal catastrophic reinsurance fund.
Mr. Sanchez said he was pleased with the lawmakers’ response. However, “we’re not waiting for Washington to solve this problem,” he said. “We’re taking the bull by the horns in Florida.”
At the state level, he is trying to increase the hurricane fund’s capacity, and he hopes the upcoming summit will produce concrete ideas about how to attract private insurers back into Florida.
Though the Florida Legislature is not currently in session, Mr. Sanchez said a special session could be called in mid-November to deal with the insurance situation and other issues.
