Florida Homeowners Insurance: How Big Is the Availability Problem and Is There a Fair Solution?

This article features a panel discussion on hurricane and wind insurance organized by Jeffrey L. Kucera for the American Risk and Insurance Association (ARIA) 2008 Annual Meeting in Portland, Oregon. The moderator, Jeffrey L. Kucera, is a Senior Consultant with EMB in North America. He has over 30 years of experience in the property-casualty business, joining EMB after a 24-year career with Allstate and 5 years as a consultant. Jeff's primary practice areas are rate making, class plans, and product development. While knowledgeable about all personal lines, he has particular experience in the homeowners line. He graduated from the University of Nebraska in 1975 with a major in mathematics and a minor in economics. He became a member of the American Academy of Actuaries (MAAA) in 1980 and a Fellow of the Casualty Actuarial Society (FCAS) in 1984. Three presenters provide a discussion on Florida Homeowners Insurance. The first presenter is Chris Carlson, a consultant with Pinnacle Actuarial Resources, Inc. He holds a bachelor of science degree in mathematics from the University of Oregon. Before joining Pinnacle Actuarial Resources, he was employed for over 25 years with Nationwide Insurance Companies in Columbus, Ohio. He is currently the President of the Casualty Actuarial Society, a fellow of the Casualty Actuarial Society, and a Member of the Academy of Actuaries. The next presenter is Locke Burt, President and Director of Security First Insurance Co. of Ormond Beach, Florida. He has 35 years of experience in the insurance profession, and in 2005, formed Security First Insurance Company. He also owns Burt & Scheid Facultative Corporation, which underwrites property facultative reinsurance on behalf of Liberty Mutual Insurance Co. and Employers Mutual Casualty Insurance Co. He holds both a bachelor of science and a master's of business administration degree from Northwestern University and a juris doctorate degree from Loyola University in Chicago. He is a licensed reinsurance broker and a licensed attorney who is a member of the Illinois and Florida Bar Associations. He was a senator in the Florida legislature from 1991 to 2002 and experienced Hurricane Andrew first-hand. While in the Florida Senate, he served as Chair of the Appropriations Committee and Republican Majority Leader. The final presenter is Jim Massie, and he provides the reinsurance perspective on Florida homeowners insurance. He is the Senior Partner of Massie Law Offices in Tallahassee, Florida, specializing in reinsurance and insurance law, seaport issues, and administrative law. He received his bachelor of arts from Miami University in Ohio and his juris doctorate from Florida State University. Interestingly, when he is not working on insurance issues, he likes to breed and race thoroughbreds. Jeff Kucera: Florida's economic growth and exposure to hurricane losses make it unique from an insurance risk perspective. The potential for catastrophic losses is in the billions of dollars, and the "risk of ruin" is a real threat for many insurance companies. More important, it is not just insurers that face severe economic pressures should the megahurricane event occur. Many insureds will also be surprised to learn that their insurance rates could be significantly increased, and these premiums are not just for their homeowners insurance. The three panelists will further describe how the situation has grown and their perspectives of the situation as an insurance company owner and reinsurer. Christopher S. Carlson: Florida's economic picture is a rather unusual situation of supply and demand interplay. Policyholders demand insurance policies, and insurance companies provide capital to write those policies. Affordability and availability are the key dynamics in the Florida homeowners market. That is, Florida homeowners think that insurance should be affordable, whereas insurers are concerned with the availability issue since their capital is at risk. …