Insured

A post-storm assessment of the state's performance during Irma reflects mostly strengths. Florida's emergency services personnel and first responders performed admirably. Likewise, the state's largest utility, FPL, in restoring power. Duke Energy, less so. Even people who don't like Rick Scott had to acknowledge that governor was engaged and effective in trying to communicate information Floridians needed to stay safe.

The storm's aftermath revealed another strength - a property insurance market that - a quarter-century after Hurricane Andrew shattered it - is healthy and growing. It's been a longtime coming, and the process has vindicated policies meant to restore the private market.

Five years ago, state-run Citizens Property Insurance had 1.5 million policyholders and some $512 billion in exposure. Its worst possible loss would have been $24 billion, a sum far beyond its reserves. Since then, the "depopulation" policy of moving Citizens policies to private companies has put Citizens in a much stronger position. Citizens CEO Barry Gilway, an industry veteran, has done a commendable job of implementing it, often in the face of political pressure and suspicion about the financial health of the insurers who took over Citizens' policies.

Bottom line: When Irma hit, Citizens had shrunk to a third of its 2012 size, with only about 450,000 policyholders and $116 billion in exposure. The company's actual losses from Irma - Gilway expects at least 70,000 claims - will exceed $1.2 billion. But Citizens won't have to use more than $1 billion of its $7.5 billion in reserve funds. Reinsurance will pay the difference.

That should leave Citizens with a healthy $6.5 billion in reserves. Most important for Floridians is that Citizens won't have to tax them to make up for losses as it did after the storms of 2004-05, when the company was on less solid footing. Remember that while Citizens only has about 8% to 9% of Florida's property insurance market, it can tax policyholders from all insurance companies to make up any losses.

Gilway says Irma was a "hugely significant storm," but "a far more manageable event than it would have been had we not gone through depopulation."

Florida's property insurance market is, in fact, "the most competitive in the country" at the moment, says Jay Neal, president and CEO of the Florida Association for Insurance Reform. No insurer in Florida, he points out, has more than 10% of the market. The new companies' financial strength to withstand Irma, he says, "is not even in question." Some of the new Florida firms are growing enough to expand into other states, with Tampa Bay emerging as a center for new firms.

More good news: Neither Gilway nor Neal expects Florida insurers to face big increases in what they have to pay for reinsurance. The reinsurance companies, says Gilway, are "incredibly well capitalized" right now, and Irma "is not an event that will significantly drive up reinsurance rates."

The biggest cost driver in the insurance market, in fact, has nothing to do with Irma or reinsurance rates. It's the escalating "assignment of benefits" catastrophe with its nexus in southeast Florida.

Insurance rates had been falling until around 2012-13, when a cabal of home repair companies, plai.jpgfs attorneys and private insurance adjusters began running amok in the region. They convince policyholders with water leaks or other damage to sign over the rights to the insurance payments to repair home damage. The repair company gins up an inflated bill, and if the insurer doesn't pay, the repair company sues in the policyholder's name. It's a lucrative little game for the repair companies and plai.jpgfs attorneys if it works; ifit doesn't, the policyholder can end up with a lien on his house as the repair company fights it out in court with the insurance company.

Well before Irma struck, some companies in south Florida had stopped writing policies because of assignment of benefits abuse. The number of AOB lawsuits against the state's largest insurer, Universal Property and Casualty, "more than doubled between the first halves of 2016 and 2017, as did the percentage of those lawsuits originating from south Florida," according to a Sun Sentinel report.

Meanwhile, early this year, ratings agency Demotech threatened to downgrade at least 10 to 15 Florida insurers because of the uncertain environment caused by assignment of benefits lawsuits. The rating matters because it plays a role in how much insurers pay for reinsurance - and therefore how much they charge policyholders. Most companies doing business in south Florida have been forced to seek higher rates to pay the litigation and claims costs from AOB.

Consumers, for their part, should understand that any increases in their premiums in coming months won't be because of Irma or "greedy insurance companies," but rather from costs imposed by the misuse of assignment of benefits.

As for lawmakers, they should understand that their failure to shut down assignment of benefits abuse is imperiling a growing, competitive industry. Republican leaders who are so averse to imposing taxes for other purposes have no business allowing the plai.jpgfs Bar to impose one of their own in the form of unnecessary insurance rate increases on consumers.