A failed insurance market

Reading the recent headlines regarding Florida's property insurance crisis is as depressing as watching gas prices rise. State Farm, the state's largest private insurer, wants to increase rates by an average of 47 percent. The state is paying $224-million to Warren Buffett's Berkshire Hathaway company for the privilege to borrow up to $4-billion to help the Florida Hurricane Catastrophe Fund pay claims if it comes to that. But there isn't any money left to cover free home inspections for responsible Floridians who want to learn how to harden their houses and qualify for discounts in premiums.

It does not take an actuary to figure out the trend lines aren't good. The state's efforts to make property insurance more accessible and affordable are not working. Hope and prayer for another hurricane-free season are the only things standing between Florida and financial disaster — and they aren't enough to substantially lower rates.

State Farm's proposed rate increases, which could be as much as 91 percent in parts of Pinellas County, are untenable for many homeowners. The company already is dropping 50,000 coastal policies and not writing new ones. This request suggests it is not all that interested in doing business here. Regulators should take a close look at the hurricane models State Farm used to justify the rates and how much reinsurance it is buying from itself.

But this rate filing is only the latest indication that the private insurance market remains broken, perhaps irretrievably. Paying Buffett's company a quarter-billion dollars in Cat Fund cash so it will loan the fund money that policyholders would have to repay is highway robbery. It was a desperate but necessary move to reduce the Cat Fund's exposure after a major storm — something the Legislature should have done but failed to during the regular session.


Tampa Bay