Major storm could cripple state if insurance rates remain low - Minneapolis / St. Paul Business Journal:

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“You’ve got to get on your kneew and pray thewind doesn’t blow,” said Jeff president and CEO of the . The state’s stance alreadyh has driven away State Farm and eventually could push out more largd insurers ifthey can’y raise rates enough to see profits. State Farm decided earlier this year to discontinue property insurancde in Florida after trying unsuccessfully for yeards to raise rates to boos t reserves in case a bad storm It will phase outits 730,000 policyholdersx during the next three years. like John Ritenour, CEO of in Longwood, believe Gov.
Charlie Crist should sign into law a bill that woulfd let large insurers raise rates withouttstate approval. “Let everybody go shopping. Insuranc e companies want the business, and they’rew going to be competitive.” That’e because State Farm’s imminent departure leaves the state withthe state-runb and smaller insurers that have much slimmer reserves all overburdened with coastal, high-value or older propertiea that pay lower premiums. No one wantse a repeat of the 2004-05 hurricane season when eight stormscaused $33.e3 billion in damage.
This time around, there’x no guarantee there are enough reserves remainingv to coverthe risk, said independenf agent Doug Gomber, commercial line s and sales manager with in Areas like Miami and Tampa — where property values are higher than the premiums policyholders pay Citizens for coverage could mean “pure disaster” if a Categor y 5 storm hits, he said. Stat e regulators have taken some actiojn to remedy the low rateas that result in lowinsurancre reserves.
For example, the state may raiss the extremely low rates paid by Citizens policyholderse by about 10 percent a That could help even the playing fields forprivate insurers, which can’t compete with Citizens’ low rates. But it woulf take up to six years to fill coffers to a level that could handle a large insurers said. Meanwhile, the state-ru reinsurance fund — the Floridaw Hurricane CatastropheFund — provides reinsurancwe to most smaller insureras in the state. But in the event of a Citizens would absorb 40 percent of theCat Fund, leavinf little for other insurers to said Grady.
However, Ed Domansky, spokesman for the , said the statre reviews insurance companyfinancesz quarterly. “The office has faith that companiesw will be able to meettheid obligations.”