Flood Insurer Has Too Much Tampa Area Business

Aug. 16--ST. PETERSBURG -- A leading company in Florida's nascent flood insurance market stopped writing new policies this week in the Tampa Bay area where demand for private coverage has proven strong.

Local insurance agents say there are still private options available to homeowners and businesses that can't afford escalating premiums in the National Flood Insurance Program, but the policies backed by underwriters at Lloyd's of London were the most popular in the region.

The Flood Insurance Agency of Gainesville announced last fall it would offer policies through a syndicate of insurance giant Lloyd's at lower rates than the federal program, a relief to many homeowners who were losing previously subsidized government rates.

A handful of other insurers since have entered the Florida market, though a law passed by Congress in the spring slowed rapidly rising premiums for primary homes, which made the need for private alternatives less urgent.

Although overall demand has simmered down this summer, the Lloyd's policies had become so heavily concentrated in the Tampa Bay region that the company was forced to stop offering new coverage in Pinellas, Hillsborough, Pasco, Sarasota and Manatee counties.

"If I look at the state of Florida, we currently insure more than $250 million of property value," said Evan Hecht, CEO of The Flood Insurance Agency. "Too much of that is in those five counties."

The company quickly has grown from its base in Florida to a total of 24 states, offering coverage for vacation homes and commercial properties, which are not shielded from annual premium increases of 25 percent in the federal program, as well as primary residences.

The trouble is a large portion of these policies, and the risk for big claims in the event of a catastrophe, are in the Tampa Bay region, which has an unusually high number of older properties subject to long-term government rate hikes.

"We're going to do whatever we can to penetrate the rest of Florida so that the risk is spread, so we can open up those counties again," Hecht said.

The fact that the Lloyd's program hit capacity isn't necessarily bad news for Florida's flood insurance market, says state Sen. Jeff Brandes, R-St. Petersburg, who championed a law to bring more private companies into the state.

"That shows how much demand there is for private flood insurance," Brandes said.

What Brandes and other advocates of private flood insurance hope to see are more companies operating in the state's admitted market, which is monitored by the Florida Office of Insurance Regulation.

Lloyd's operates in the surplus lines insurance market, which means it is not required to get approval for rate changes and the state will not financially guarantee policyholders' claims should the company go bankrupt.

The new law that went into effect this summer streamlines the process for new admitted insurers to get state approval, but companies have shown limited interest so far.

Tampa-based Homeowners Choice Property & Casualty Insurance began offering flood coverage as part of its homeowners insurance policies before the law was passed.

Many other companies are studying risk models to determine whether they can compete with the government's rates.

As the government's premiums continue to climb by 15 to 18 percent each year even for primary homeowners, St. Petersburg insurance agent Jake Holehouse predicts more companies will find it profitable to enter the Florida market, which will help spread the overall risk.

"Long-term, what I think we're going to see happen is more private market is going to come into play," he said.

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