Florida Policies in Limbo Over Proposed Insolvency Surcharge

The Florida Insurance Guaranty Association is urging insurers to hold off on sending homeowners’ policy renewals until state regulators decide if they will approve a surcharge on premiums to help cover more than $168 million in claims left from two carrier insolvencies this year.

With thousands of notices for 2022 policy renewals set to go out in the next few weeks, some insurers have begun to ask what they should do while the Florida Office of Insurance Regulation deliberates on the requested 0.7% increase in premium assessments

“We’ve had a lot of calls about it,” said Tom Streukens, executive director of the guaranty association, known as FIGA, which handles insurer insolvencies. “We’ve reached out to member companies and have asked them to stand down for now.”

Streukens said Friday that he expects the Florida Office of Insurance Regulation, headed by Insurance Commissioner David Altmaier, to make a ruling on the assessment in the next two weeks.

“We haven’t heard much about it. Everyone’s just waiting on OIR right now,” said William Stander, director of the Florida Property and Casualty Association.

FIGA requested the increased assessment in late August, after it became clear that more than 1,300 unpaid claims for the insolvent carriers would leave FIGA with a mounting deficit.

This is the first time since 2012 that FIGA has had to raise the surcharge. But with a property insurance market that has been buffeted by hurricanes and what insurers have called fraudulent assignment of benefits claims and excessive litigation, two carriers were liquidated this year: American Capital Assurance Corp., known as AmCap, and Gulfstream Property and Casualty Insurance Co. Those followed two other significant insolvencies in 2020.

In most insolvencies through the years, FIGA has been able to pay off claims without raising the surcharge, utilizing revenue from the liquidation of the carriers’ assets, from investment income, and from the Florida Hurricane Catastrophe Fund, FIGA’s annual report explains. This year, though, with two major carriers in trouble, and perhaps more on the way, FIGA staff have warned that insolvent carriers’ assets weren’t enough to pay the bills, and the association could run out of cash by this time next year, according to Florida news reports.

The FIGA board of directors approved the 0.7% assessment increase Aug. 26, but little has been heard from Altmaier, the governor or cabinet members, who could delay or veto the assessment altogether.

The OIR did not respond to a request for comment by Friday afternoon. But if recent history is a guide, it would not be out of character for Altmaier, Florida’s insurance commissioner since 2016 and current president of the National Association of Insurance Commissioners, to ask for a smaller surcharge.

In workers’ compensation insurance rate decreases, for example, Altmaier has bucked the National Council on Compensation Insurance on three of the last four filings, forcing NCCI’s actuaries back to the drawing table to produce larger rate cuts.

And Florida Gov. Ron DeSantis has shown a willingness to block relatively minor spending increases, even when funding does not come from taxpayers. In 2020, DeSantis vetoed a bill that would have raised workers’ compensation judges’ salaries for the first time in two decades. The revenue would have come through a small fee on insurers.

For now, Florida insurers and agents have little choice but to wait and see if OIR approves the fee increase with what’s known as a levy order.

“We appreciate everyone’s patience and understand the time sensitivity for system changes required to implement FIGA’s proposed assessment in advance of processing January 2022 renewals,” FIGA posted on its website last week.

Streukens said it’s unclear what might happen if insurers start renewing policies without the assessment fee increase – if carriers could add the charge later in the policy year. With many homeowners’ premiums paid through escrow funds, “that could get complicated,” he added.

“FIGA will provide members with special instructions at a later date for how to address impacted policies issued without the surcharge before the levy order was approved,” FIGA wrote.

The rest of 2021 and 2022 may not be much easier for FIGA and some Florida property insurers. At a Sept. 22 Florida Senate Banking and Insurance Committee hearing, Altmaier said that his department is watching several carriers that may be in financial trouble.

Two, in particular, “we’re keeping a very close eye on,” the commissioner said.

FIGA officials are not looking forward to more insolvencies.

“I hope the next one is the last one,” Streukens said. “But I said that about the last one.”