Florida House Of Representatives

Dennis A. Ross

Representative, District 64

4416 Florida National Drive204 house office building

Lakeland, FL 33813402 South Monroe Street

(863) 701-1400Tallahassee, FL 32399-1300

fax: (863) 701-1402(850) 488-2270

e-mail:

January 11, 2019

The Honorable Kevin McCarty

Insurance Commissioner

Florida Office of Insurance Regulation

200 East Gaines Street

Tallahassee, Florida 32399

Dear Commissioner McCarty:

I feel compelled to respond to your editorial piece which was published in several newspapers statewide and sent to members of the Florida Legislature.

While I agree with you that consumers should have affordable insurance to which to insure their homes and businesses, those insurance rates must be actuarially adequate. Insurance companies have a fiduciary responsibility to their policyholders to make certain claims can be paid. Unlike Citizens, the private industry cannot assess taxpayers for any deficits. It is for this reason that insurance companies are buying reinsurance in addition to the CAT Fund. The CAT Fund, itself, has no reinsurance and the state has no experience in the reinsurance business and because of this, the financial rating companies have lowered the ratings of the insurance companies. When the State of Florida has no money to pay its claims, what are the insurance companies going to do?

Unfortunately, you tout the expansion of Citizens Property and Casualty Insurance Company (Citizens) and the Florida Hurricane Catastrophe Fund (CAT Fund) as the solution to reducing rates in the State of Florida. These, however, are nothing more than price controls, and history has painfully taught us that this practice will not work in a capitalistic economy.

I am very concerned that the Office of Insurance Regulation (OIR) is focused on rate reduction solely for the sake of rate reduction and not for the purpose of fostering a competitive

market which will ultimately result in the return of private industry. There has been no effort made by OIR or the Legislature to instill a private market that will compete for consumers’ business. It is axiomatic that competition and market forces will result in better insurance products at better prices for consumers. In addition, I am gravely concerned that OIR is not focusing more on the solvency of the insurance companies. Had we paid more attention to their financial stabilities during 2004-2006, we may not have witnessed the fall of both Poe Financial Group and Vanguard Fire and Casualty. Their collapses resulted in over 300,000 policies being forced into Citizens.

I view OIR as being similar to an economic development organization whereby its main focus is to foster private capital competing for consumer dollars so that the burden of risk is shifted from the taxpayer to private capital. Unfortunately, the legislation passed in January and your efforts to continue to chastise the private market have done nothing but increase the burden of exposure in the State of Florida which will now be borne by all policyholders via assessments on their property insurance, automobile insurance and business liability insurance.

If we are ever going to solve the insurance crisis in the State of Florida, then we must not only encourage the return of the private insurance market, but the industry must also be allowed to compete for consumer business in a regulatory environment which encourages competition. Unfortunately, I do not foresee this change coming in the near future. Rather, I fear that more and more insurance companies will continue to leave the state and a greater burden of exposure will be borne by the taxpayers.

The time for change, however, is upon us. I urge you to consider changing your course and begin anew, setting your sights now on bringing back risk based capital into our market. Consumers have a right to have businesses competing for their interests, and they are entitled to choices. When the consumers only choice is taxpayer based government insurance, then we policy makers and regulators have done a terrible disservice to the consumer. We must chart a course to create market rate competition with a solvent, insurance market. The State of Florida can be the catalyst to fostering this change, but we cannot, and should not, offer our state’s economic livelihood and well-being as the solution to our markets return.

Yours very truly,

Dennis A. Ross

Cc: Members, Florida House of Representatives

Vice Chair, Safety and Security Council

Policy and Budget Council

Committee on Business Regulation

Committee on Homeland Security and Public Safety