I spent several days in Orlando recently at the National Association of Insurance Commissioners (NAIC) Fall 2010 National Meeting. As I listened in at various committee meetings and task forces, I was struck by how often Florida came up in discussions: "Florida is the critical player here." "What did Florida do?" "How did Florida react?"
The emphasis was not altogether due to our state's size or geography. Florida Insurance Commissioner Kevin McCarty is a very big player in this very significant arena. Love him or hate him, he is no dilettante. He understands the complex world of insurance and is an incredibly hard worker. For that, he is well respected in NAIC circles, evident by his selection as the 2011 president-elect of the group. However, being well respected does not confer favorite-son status on Florida or McCarty; the attitude that other regulators and states have about Florida is not necessarily positive. His election may be due more to the fact that NAIC is dominated by pro-regulatory states than admiration for how Florida oversees our industry.
Indeed, the environment here is awful, although that is not entirely McCarty's fault. Gov. Charlie Crist has almost single-handedly destroyed the state's property insurance market. We should all offer up a prayer of thanks that we have had no major storms during his term.
McCarty was appointed insurance commissioner in 2003, and while the relationship between regulator and regulated is never easy, it was workable for several years. It started to fall apart in 2006 when McCarty began tuning out CFO Alex Sink and aligning himself solely with Crist, right or wrong. That wacky synergy he had with Crist prompted some dramatically bad decisions on rates and regulations.
Over the past several months, with Crist busy on the campaign trail, there has been a positive shift at the Office of Insurance Regulation. McCarty has been approving rate increases, attacking public adjusters, going after other cost drivers, and sounding the alarm on sinkholes.
Most notably, he was a strong advocate for SB 2044, the omnibus property insurance bill that enjoyed strong support from the industry and others. After the bill landed on Crist's desk in May, McCarty urged the governor to sign it, writing, "This bill is an important piece of legislation that benefits the people of Florida by protecting consumers from unsupported rate increases and guarding against disruptions in the marketplace." Crist, as we all well know, vetoed the bill anyway.
McCarty also seems to be trying to work with the industry on a solution to Citizens Property Insurance Corp. Unfortunately, the market is in such chaos that dramatically reducing the size and exposure of Citizens will require a two- to three-year plan. Before we can effectively shrink Citizens we need the ability to build the private property insurance market close to normal again so that homeowners have a place to go.
Perhaps we are moving toward that goal; property insurance remains high on McCarty's radar. Amidst his NAIC meetings, the commissioner seized the opportunity to hold — according to a press release — a "Public Symposium to generate reasonable ideas and solid recommendations for stabilizing, improving and growing the private Property Insurance marketplace in the State of Florida."
In his opening remarks at that meeting, McCarty said, "Florida's property insurance market is wholly unique and adequately calculating and addressing the catastrophe risk each property insurer has in this state is challenging. Efforts to ensure a robust and stable private insurance marketplace are my number one priority."
These actions and statements remind me of McCarty circa 2003-2005. In his early years as our appointed commissioner, reasonableness and dialog often carried the day. Is McCarty having a real change of heart now, or is he just trying to keep his job? The new cabinet takes office in January; the 2011 Legislature convenes in March. Where McCarty stands — or will sit in this new administration — remains an open question for now.
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