Paige St. John's Blog

The Good, The Bad and The (very) Ugly

2007-12-03T19:34:00.000-05:00

It shouldn't be surprising that 72 hours after being hired, BlackRock
financial managers were telling the state what to do about its frozen
local investment fund.

Even before it went to work for the state, BlackRock's director of
credit analysis had produced a detailed accounting of the scarey
mortgage-backed investments that had caused a $16.5 billion run on the
state-managed fund.

Late Friday, BlackRock put that homework to use, securing the
$125,000 state contract to advise Florida what to do with its stinky
investments.

On BlackRock's safe-to-sell list: properties like AngleSea Funding
and Berkely Square Finance, both conduits for repossessions.

On the "dislike" list: Axon Financial Funding, a $9.3 billion SIV
that's in default, and Giro Balanced Funding, which BlackRock notes has
a 35 percent direct interest in subprime mortgage-related assets.

There are a few mortgage-backed investments in Florida's portfolio
that BlackRock considers keepers: Belmont Funding ("sound asset
quality") and Beethoven Funding ("fully-supported by structured
liquidity").

Another Profit Report

2007-10-26T11:22:00.000-05:00

St. Paul-based Travelers reports a very profitable third quarter for
the home and auto insurer.

Net income for the three months ending in September is up 15 percent
at $1.2 billion, helped by increases in both premiums and investment
earnings. That raises its profits for the year to date to $3.5 billion.

The company says it has raised home insurance rates this past year an
average 9 percent nationwide.

In Florida, operating under the moniker of First Floridian, the
company seeks to raise home insurance rates an average four percent,
after lowering them 8 percent in June.

Nationwide's rate cut approved (quietly)

2007-10-18T11:28:00.000-05:00

Without nearly as much fanfare as goes into rejecting rate hikes,
Florida insurance regulators wasted no time in approving Nationwide's
decision to go with the flow and cut home premiums an average 16 percent.

The filing with the Office of Insurance Regulation has been quietly
stamped "approved," pending receipt of final documents.

The approval brings total premium reductions since June to 21 percent
for the Florida insurer, exceeding the expectations and promises of
Florida's insurance consultants. The savings is despite Nationwide
Insurance Company of Florida's decision to buy $49 million in additional
reinsurance from its national parent as well as the private market.

Farm Bureau's hike: $2.4 million a month

2007-10-16T13:36:00.000-05:00

Florida Farm Bureau protests a request by state regulators to delay
an upcoming administrative hearing on the company's denied property
insurance rate hike.

The 25 percent increase was to have gone into effect earlier in
October and every day that goes by is costing Florida Farm Bureau
$78,000 in lost revenue -- $2.4 million a month.

Or look at it this way.

Every day that goes by without the rate hike being approved is saving
Florida Farm Bureau's customers $78,000 -- $2.4 million a month.

State wants more time to take on Farm Bureau

2007-10-15T09:19:00.000-05:00

The Office of Insurance Regulation says it is not ready to go
head-to-head with Florida Farm Bureau over denied rate hikes.

The state agency on Monday asked an administrative law judge in
Tallahassee to postpone hearings on the two-month-old case, set for hearings on Nov.
5 through 9. The state contends the case is "complex" and requires
extensive discovery, including expert witnesses and depositions of nine
individuals that have not yet taken place.

What's more, OIR lawyer Marc Herskovitz says he's tied up in other
matters -- including a district court appeal with Universal Health Care
Insurance.

The property insurance wars go public again on Thursday, when state
regulators are scheduled to grill executives of Cincinnati Insurance
about the role financial rating firms and reinsurers played in the
company's request for rate hikes.

Stuck with another roll of the dice

2007-10-11T14:34:00.000-05:00

Florida's $28 billion bet against a 2008 hurricane is back on the table.

House Majority Whip Ellyn Bogdanoff likes CFO Alex Sink's proposal to
let the Florida Cabinet set the terms and rates of hurricane protection
the state sells the insurance industry.

In fact, Bogdanoff helped originate it.

But the current calendar of blended special sessions doesn't leave
the House leader enough time to make her case to the rest of the
Legislature. Bogdanoff says she would need at least two weeks' down time
to sell fellow legislators on the merits of giving up the steering wheel
and allowing the Cabinet to drive a more-nimble Florida Hurricane
Catastrophe Fund.

If that's the case, Florida's fallback position is going through a
second hurricane season with the full $28 billion Cat Fund created by
the Legislature in January 2007 -- selling what for Sink is a very
uncomfortable amount of insurance at a time when private market
reinsurance rates are beginning to drop.

Bogdanoff's hope -- that those prices go down so low that private
insurers simply pass by the exposed state fund, and do their reinsurance
shopping in Bermuda.

Reinsurers like Sink's idea

2007-10-10T08:10:00.000-05:00

It's no surprise the reinsurance industry likes CFO Alex Sink's idea of taking Florida's Cat Fund out of the hands of legislators.

Lawmakers responding to citizens fed up with their insurance rates doubled the size of the state fund, taking $16 billion of sales away from the private reinsurance industry. In the end, insurance companies made up for the lost business, by buying more product.

Sink believes the Florida Cabinet can do a better job of matching state risk to state need, and believes that as private reinsurance rates come down, the Cat Fund can lighten up. And that means less competition to reinsurers.

"We believe CFO Sink's proposal makes a great deal of sense," says Frank Nutter, president of the Reinsurance Association of America. "The private reinsurance market has both the capacity and the appetite to accept Florida's catastrophe risk and is able to spread that risk around the world, rather than concentrating the risk in Florida as is currently the case.

"The private reinsurance market can do that without the huge post-hurricane assessment/taxes inherent in the current law. We will cooperate with CFO Sink as she moves forward with her excellent proposal."

Insurer says investigation 'punishment' for hikes

2007-10-08T15:24:00.000-05:00

Cincinnati Insurance accuses state regulators of "fishing" for
alleged collusion to punish it for asking for higher premiums.

"OIR's insistence on such a broad scope for its subpoenas can only be
for purposes of punishing Petitioners for seeking a rate increase,"
attorney Harry Thomas writes in a petition asking a Leon County Circuit
Judge to limit the reach of investigators.

The Office of Insurance Regulation has demanded extensive amounts of
records from at least three companies -- State Farm Florida, Cincinnati
and Auto-Owners Insurance. It seeks copies of their correspondence with
rating agencies, trade organizations and catastrophe modeling firms.

Cincinnati says the subpoenas are so broad it would have to turn over
copies of trade magazines, McDonald's receipts and invoices for soup as
well. It blames "frustrated politicians" and "apparent political
motivations" for an "obvious attempt to divert public attention and
publicity away from OIR and the Governor's representations" of promised
rate cuts.

Gov. Charlie Crist referred to the investigation repeatedly at a
September Cabinet meeting, vowing to uncover whether Florida insurers
have conspired to thwart rate cuts. Some three dozen insurers seek to
raise rates instead. Cincinnati has filed for a 37.5 percent increase.

To date, court files show, Cincinnati has turned over 4,400 pages of
records in three cardboard boxes. Regulators say Cincinnati is
withholding material, sometimes not even identifying what it won't
release. However, two of the internal documents withheld so far go to
the heart of the investigation -- notes show they address Cincinnati's
legal strategies in Florida.

The early bird on property taxes...

2007-10-03T12:44:00.000-05:00

Decorum prevents House Speaker Marco Rubio from pushing new property
tax cuts when he's supposedly agreed to Senate President Ken Pruitt's
demand for a special session focused on rebalancing the state budget.

But he can't seem to help himself.

Property taxes, after all, are what the speaker says are to blame for
Florida's stagnating economy and listing sales tax collections.

To get ready for a second October special session, the speaker has
assembled a 20-page synopsis of 18 property tax cut plans, including a
new one dated last week that limits property taxes to 2 percent of the
value of a home, caps those taxes to 5 percent of the income of
low-income seniors, and raises state sales taxes by a penny to plug the
hole in local school district budgets.

Read the document here... taxsummaries.pdf

New word from Insurers: Withdrawn

2007-09-26T14:11:00.000-05:00

Not every Florida insurer is willing to take on Gov. Charlie Crist
and a public hearings-happy Office of Insurance Regulation.

As the deadline looms to file new rates that Crist insists must lower
premiums for the average Florida homeowner, a number of insurers are
having second thoughts about the hikes they initially sought.

Horace Mann, Teachers Insurance, and the AMEX Assurance/IDS Property
companies have all withdrawn their proposed hikes. So has Sentry
Insurance and Capitol Preferred.

Property insurers have until Sept. 30 to file final proposed rates
that reflect the state's $15 billion expansion of the Florida Hurricane
Catastrophe Fund.

Insurers Reap Record Profits (again)

2007-09-25T12:23:00.000-05:00

This just released from two insurance industry groups:
"Property-casualty insurance industry net income for the first half of
this year hit a record $32.6 billion."

A co-author of the report is the Property Casualty Insurers
Association, which has been beating up Gov. Charlie Crist particularly
hard over his efforts to force competition in the Florida market.

The record net income surpasses the $29.4 billion highwater mark set
midway 2006. The report is based on a survey of U.S. property and
casualty insurers, including both home and auto underwriters.

For insurers, the golden lining carries a dark threat: increased
competition. The Insurance Information Institute is among those urging
insurers to keep from entering what usually comes next -- a cycle of
falling rates.

"The most important question facing the industry today is whether this
painful and destructive cycle can be broken," says Robert Hartwig,
president of the national trade organization and another frequent voice
in the Florida insurance wars.

Bush Unhappy With Crist's Path

2007-09-18T12:26:00.000-05:00

Since leaving office, Gov. Jeb Bush has had little to say about how
Charlie Crist is running the enterprise of Florida.

Not anymore.

Addressing a convention of insurance company executives Monday in
Texas, the former Republican governor spoke harshly about efforts at
insurance reform, both nationally and here in Florida.

"We don't really have aninsurance problem; we have a natural
catastrophe problem," Bush is quoted by Advisen Front Page News, a trade
organization covering the National Association of Mutual Insurance
Companies meeting.

Bush in his own term favored private market remedies and even toyed
with outsourcing and therefore spreading the state's hurricane risk, by
selling catastrophe bonds to the financial markets. Crist has taken the
opposite approach, putting the state in direct competition with private
insurers and reinsurers as well and in the process internalizing most of
Florida's hurricane threat.

In his keynote speech to NAMIC, Bush complained some states are
"offering solutions that are as bad as the natural disasters themselves."

"My beloved state of Florida has taken steps along that path," he
added, noting "when the government assuems the risk of these
catastrophic events, they are putting at risk the livelihoods and
quality of life of the taxpayers and citizens they serve."

Bush put in a plug for two former House insurance chairmen who have
been censured for publicly opposing Crist's efforts, Dennis Ross and Don
Brown. NAMIC on Monday gave Brown its award as the top state legislator
of the year.

The push is on: keep insurance rates high

2007-09-10T09:26:00.000-05:00

If it's September, then we must be in Monte Carlo.

The highest rollers in the insurance market -- those global
re-insurers who underwrite the companies who underwrite your home and
therefore are responsible for most of the price hikes in Florida -- are
holding their annual Rendevous this week in Monte Carlo. There is a
sailing regatta and fine dining. But mostly, in the cool salons of swank
hotels, the talk is about standing firm against falling prices, which
peaked last summer.

Gov. Charlie Crist, who two months ago accused the industry of
collusion to keep rates high, will want to note this: among those
advising reinsurers to resist downward pressure (price cuts) is a major
bond rating firm.

"Globally, reinsurers have to withstand pressure from primary
insurers [to cut prices] when there is no clear rationale to do so,"
said Michael Zboron, analyst at AM Best, is quoted by Reactions, a
financial trade publication covering the Monte Carlo conference.

Jeb on State Farm's Payroll?

2007-08-29T15:39:00.000-05:00

Florida's former-largest insurance company is about to get a lesson
in leadership from Florida's former governor.

Jeb Bush, who went on speaking tour shortly after leaving office,
keynotes next month's convention of National Association of
Mutual Insurance Companies in Grapevine, Tex. NAMIC's membership
includes the State Farm Mutual family, which has had nothing but
heartburn in Florida since Bush left and was replaced by Charlie Crist.

Here's the NAMIC word on Crist: "Once again, Florida's governing administration has demonstrated its inability to comprehend or appreciate the realities of the state's insurance situation..."

NAMIC's take on Jeb: "Widely respected for his transformational leadership that enacted
sweeping reforms in the state of Florida, he is well suited to address
leadership and managing change."

What can NAMIC members learn from Bush?

"As governor, he shared his personal e-mail address and invited his
constituents to send him their concerns. This belief in transparent,
customer-oriented service reflects Bush's style of leadership: 'stay
connected and pay attention to your customers,' " the trade group states.

"As leader of one of the most dynamic states in the country, Bush
advanced key reforms by inspiring people to believe that the future
could be better through change. His philosophy of 'Say what you are
going to do and do what you say' allowed him to win trust and
effectively manage a large, diverse bureaucracy. His unifying management
style was key to effective emergency preparation and response in the
face of eight hurricanes during his tenure.

"In his keynote address, 'Saying What You're Going to Do . and Doing
It,' Bush demonstrates how to unite a disparate team into one focused on
innovation and continual success. He defines leadership as 'being an
advocate for big ideas that require big change.' In eight years serving
as governor, he garnered respect for enacting reforms to such
traditional institutions as education and health care as he shaped
policy and sweeping reforms.

"Audiences will learn why leaders should:

"Encourage transparency: Say what they're going to do-and then do it;
"Surround themselves with good people, set high expectations-and
watch them be met;
"Stay connected-enfranchise the disenfranchised;
"Understand that success is never final, that reform is never
complete and that leadership requires constant vigilance."

No Car? No Home Insurance.

2007-08-29T14:52:00.000-05:00

New York is putting the brakes on an insurance practice also taking
place in Florida -- insuring homes only for coastal residents willing to
buy car and life policies too.

New York Insurance Superintendent Eric Dinallo contends it is against
New York law for insurers to base their renewal decisions on what other
policies customers buy. The practice is known in the insurance industry
as "tying" and it is prohibited in many states. Dinallo has ordered at
least two insurers -- Allstate and Liberty Mutual -- to rescind such
policy cancellations.

"The insurance companies' actions contradict what they are telling
policyholders and regulators. They say they are trying to reduce their
exposure to the risk of losses from hurricanes. But pressuring people to
buy homeowners and auto or life insurance actually increases the
insurers' risk," Dinallo said in a prepared statement. "This is obvious
when one company's plans allow it to renew a wood frame house - which is
more susceptible to hurricanes - if the owner also has an auto or life
policy, but not renew a brick house right next door because the owner
has no other insurance with the company."

Read the New York opinion here.

State Farm Florida announced a similar practice in July, when it said it
would no longer insure homes within 10 miles of the coastline, "unless a
named insurer had an automobile insurance policy" with State Farm or its
affiliates. Some 50,000 non-renewal notices are scheduled to start
flying Sept. 15.

Earlier this year, Florida regulators objected to State Farm's efforts
to give discounts to customers who kept their cars with State
Farm but insured their homes through the state.

Can we freeze hurricanes too?

2007-08-24T13:43:00.000-05:00

The crisis at-hand is overshadowing the one that might be.

Florida's financial investors have, for now, pulled the plug on a $7
billion bond sale meant to raise cash for potential hurricane claims,
citing "current volatile conditions in global financial markets."

The State Board of Administration had hoped to make the sale of
floating rate notes by Sept. 1. They would have added liquidity to the
Florida Hurricane Catastrophe Fund, giving it more time to pay hurricane
claims before having to go to the market to borrow money in the wake of
a storm.

The SBA had already issued a preliminary memorandum of the sale, but
on Friday posted a short statement saying the deal is on ice. "The state
will continue to evaluate market conditions and access the market as
conditions normalize," the agency said.

The potential that Florida can't sell such bonds -- before or
especially after a hurricane -- has given jitters to financial rating
firms examing the state's property insurers.

Watching the Rear View Mirror

2007-08-22T15:32:00.000-05:00

Hurricane Wilma can be remembered as the storm that keeps on giving.

The news that Citizens Property Insurance must bolster its reserves to account for almost $300 million more in claims from that 2005 hurricane has an impact on Florida's other consumer-backed insurance fund, too.

The Florida Hurricane Catastrophe Fund has been told by Citizens it may be on the hook for $175 million of those as-yet unreported losses.

Cat Fund officials say they have yet to see similar reports from the rest of the state's insurers, but they have a $270 million built into their own reserves to handle such ups and downs.

" We have some intentional cushion built into our reserving and see no need to adjust it at this time," said Michael McCauley, the designated spokesman for the State Board of Administration that oversees the Cat Fund. " In the future, this can change, and we may need to adjust reserves up or down. "

For now, though, the fund asserts that the added claims from Citizens won't affect the fund's own ability to pay 2007 hurricane claims. The Cat Fund has approximately $850 million in surplus, plus $2.6 billion available to pay claims from pre-arranged bonds. With an industry-wide "deductible" for the 2007 contract year of $6.1 billion, the current threshold for triggering a consumer bailout is an $8.4 billion hurricane.

Nationwide Takes a Hit

2007-08-14T16:00:00.000-05:00

The financial gurus at A.M. Best -- which has raised the bar in
measuring hurricane risks -- takes a cautious view to one of Florida's
largest private insurance companies.

Best not only lowers Nationwide Insurance Company of Florida to a B-
rating, but adds to the downgrade the stigma of a "negative outlook."

It cites the potential of a 100-year hurricane as the cause for
concern. Despite buying reinsurance from its national parent as well as
the citizens of Florida, Best says Nationwide of Florida would suffer
"substantial decline in capitalization after a 100-year hurricane."

The credit rating company adds that new calculations of what
Nationwide's Florida storm losses would be have increased.

How Best measures such a storm is different than how Florida
regulators measure a hurricane. The rating company requires insurers to
use computer models that figure in the current frequency of hurricanes,
and adds to losses the damage expected from storm surge, even though
Florida law now exempts property insurers from paying for flood damage.

Guiliana Gets Greg

2007-08-09T13:18:00.000-05:00

Rudy Guiliani's presidential campaign has announced local leaders in
25 more counties -- leaving 35 counties to go.

Florida senior campaign advisor Karen Unger says the strength of
those names shows Guiliani's own electability in Florida.

Among the additions -- Rep. Greg Evers for Santa Rosa County and
Brevard County Commissioner Jackie Colon.

Where's Charlie?

2007-08-07T16:20:00.000-05:00

Notice someone missing from the public eye these days?

Gov. Charlie Crist has largely been on personal time since an
editorial board meeting in Tampa and ceremonial bill signing took him
out of town Thursday. Except for a brief public appearance Monday
morning to herald free anti-biotics from Publix (in Cape Coral), the
governor's daily schedules through Wednesday say only "personal day."

Where is he at? "Southwest Florida," said communications director
Erin Isaac, who would not be more specific.

When is he coming back? "I don't know..." she said. Crist might
reappear later in the week, but when was not certain.

What is he doing? Still governing, evidently, as Isaac said the
governor remained in daily telephone contact with his staff, who are
sweating it out in torpid Tallahassee.

"He's not out of pocket," she said. "You're never not the governor."

McCarty: Tell the Full Story

2007-08-07T15:46:00.000-05:00

Auto insurers who worked to kill Florida's no-fault law are happy to
see Insurance Commissioner Kevin McCarty acknowledge the impending
death of PIP.

In a memorandum issued Monday, the commissioner advises Florida
insurance companies to warn customers of the Oct. 1 repeal of Personal
Injury Protection, the mandatory state coverage plan that paid medical
bills of accident victims no matter who caused a crash.

But McCarty's memo also brings up a lot of stuff not all insurers
want to talk about.

He recommends companies tell consumers "in a clear and unambiguous
manner" about the effects of the repeal. They include potential delays
in getting medical bills paid, while insurers deliberate over who to
blame, and unreimbursed losses for motorists who lack adequate coverage.

"The increased exposure to lawsuits with the repeal of tort exemption
should also be addressed," McCarty states.

And, he stresses, consumers should be told that any promises of rates
going down should also mention that the Legislature has until Oct. 1 to
amend the law and stop the repeal.

Nationwide Clears First Hurdle

2007-08-03T10:37:00.000-05:00

Insurance regulators today Nationwide approval on its June rate cuts -- 8.1 percent
for mobile homes, and a previously rejected 4.5 percent decrease for homes. In the case of Nationwide's homeowners, there's an additional 6 percent cut still pending regulatory action.

Expect a large batch of such actions in the coming weeks as the
Office of Insurance Regulation clears its decks for the controversial
second-round of rate filings intended to bring the premium cuts
lawmakers banked on when they expanded Florida's hurricane catastrophe
fund. Those filings are due by October and insurers out the gate so far
are, to the most part, seeking hikes, not cuts.

State Farm is still struggling to get past round one. Regulators this
week rejected the company's seven percent cut, asking it to dig deeper.

Senate Dems Echo the House

2007-08-02T15:26:00.000-05:00

House minority leader Dan Gelber's call for more debate on insurance was repeated Thursday by Senate Democratic Leader Steve Geller.

But where Gelber has a proposal -- a special sesson on reforms to reshape the 2008 market -- Geller just wants an explanation.

The Hallandale Beach Democrat is asking Senate President Ken Pruitt to force insurance company executives to testify, under oath, as to why they have not lowered their rates more.

" During last January’s special session, top industry representatives specifically told us that the reasons for the soaring property insurance rates in Florida were the high cost of reinsurance," Geller writes. "We solved that problem by expanding the Florida Hurricane Catastrophe Fund (CAT Fund) to provide more inexpensive reinsurance to the industry. Additionally, rates for private reinsurance have also gone down because of our actions. Yet the windstorm rates for Floridians not only have not come down, they appear to be on the rise, along with the insurers’ profits. "

Another Rate Drop From Citizens

2007-08-01T10:20:00.000-05:00

TALLAHASSEE -- Another rate drop -- about 10 percent -- is available
starting today for 118,000 Floridians whose homes are insured by
Citizens Property Insurance through two separate policies.

The state-run insurer as of Aug. 1 is offering a single policy to
replace the two policies --one for wind, the other for everything else
-- that Citizens used to be required to sell in high-risk areas. By
combining coverage plans, the company is able to offer a lower rate.

Not just current Citizens' policyholders can buy the cheaper policy.
Homeowners who currently buy just wind coverage from the state can also
switch over, potentially robbing business from private insurers that
were willing to insure beach houses against everything but a hurricane.

Industry records show Florida insurers in March had almost 387,000 customers without hurricane coverage, led by Nationwide (57,344) and State Farm (49,401).

Coincidentally, State Farm says it is about to drop some 50,000 coastal customers, unless they have also bought car insurance from the company.

Unanswered Questions

2007-07-31T15:09:00.000-05:00

CFO Alex Sink isn't satisfied that Floridians know the whole story
behind why home insurance rates are stuck on "high."

The Florida Legislature issued another $12 billion in consumer-backed
risk in order to lower rates. After the fact, consultants hired by
Insurance Commissioner Kevin McCarty estimated the reductions would
average 24 percent. Instead, the cuts have hovered just above 10
percent. Sink wants to know why.

In particular, she wants to hear from McCarty's consumer-oriented
consultant, former Texas Insurance Commissioner Robert Hunter, largely
regarded by the insurance industry as Public Enemy Number One.

Read the letter here: Sink.doc

"I would also like for Mr. Hunter to revisit his initial analysis and
explain to the Governor and Cabinet why his projected rate reductions
have not materialized," Sink wrote in a July 19 letter to McCarty.

Hunter had a family committment and could not attend Tuesday's
Cabinet meeting, McCarty said.