Florida Chief Financial Officer Jeff Atwater on Tuesday continued to seek answers from the state's insurance commissioner about why property-insurance premiums have not come down along with reinsurance costs.
As the end of another hurricane season approaches without a storm making a direct hit on Florida, Atwater wants Insurance Commissioner Kevin McCarty to provide an analysis about how much insurers are saving on reinsurance, how the savings are being used and how customers are benefiting.
And Atwater wants the Office of Insurance Regulation to compete the analysis by Dec. 18.
"Year after year, insurance companies have been telling their customers and the Legislature that the 'simple' explanation for higher rates they are charging was due to reinsurance costs going up," Atwater wrote. "But now that insurance companies are experiencing a significant decrease in the cost of reinsurance, they are not lowering rates for consumers."
Reinsurance is backup insurance for insurance companies. Insurers in the past often have pointed to high reinsurance costs as a rationale for increasing consumers' rates.
McCarty responded Tuesday that "such an analysis is already underway."
The deadline is intended to give McCarty's office time to do a thorough analysis, but to complete the work "in a timely manner," said Atwater's spokesman Chris Cate.
McCarty expressed confidence that the study will be completed by the deadline.
Atwater's request comes two weeks after Jack Nicholson, executive director of the Florida Hurricane Catastrophe Fund, said the state-created fund --- basically a public pool that provides insurance for insurance companies --- has been able to build its largest cash reserve ever at nearly $10 billion.
Atwater noted that while Florida law allows insurers to purchase enough reinsurance to cover a 1-in-250 year-storm, "rarely if ever" such coverage is purchased.
"If companies historically did not believe they needed more reinsurance and your office was not mandating that they acquire more reinsurance, then please tell me how they are now deploying the savings they are receiving from lower reinsurance costs," Atwater wrote. "My question to you is simple: 'Why have rates not come down?' "
In August, Atwater asked McCarty to explain why property insurers hadn't reduced premiums at a time when reinsurance costs had dropped worldwide on average 15 percent to 20 percent.
McCarty responded at that time that insurance companies might be increasing the amount of reinsurance they purchase rather than reducing rates and that not enough time may have passed for the lower reinsurance costs to result in lower customer premiums. Also, he wrote that reinsurance only accounts for a portion of a rate filing, some companies have tried to spread out of the cost of reinsurance over a number of years to lessen one-time hikes on policyholders and that not every insurance company is seeing a drop in reinsurance costs.
McCarty added that some insurers have indicated an intention to reduce rates in some insurance territories based on the 2013 reinsurance costs.
The cost of reinsurance from the Florida Hurricane Catastrophe Fund is among the rates that have increased.
Of 45 insurance-company filings between July 1 and Oct. 17, there were 25 requests for increases on residential policies, seven to keep rates stable and 13 for reductions.
Homeowners covered by Citizens Property Insurance Corp. will see an average rate increase of 6.3 percent next year, down from a 7.9 percent hike requested on the combined personal-lines and coastal accounts. Citizens had 1.2 million policies as of Sept. 30.
Among rate-filing decreases approved since July by OIR, the largest has been a 7.8 percent reduction by the ACA Home Insurance Corp.
ACA handles 88,305 residential premiums.
Universal Property & Casualty Insurance Co., with 507,378 residential policies, has asked for a 2.3 percent decrease. Security First Insurance Co., with 106,572 residential policies, is seeking an 8.8 percent drop.