|
Office of Insurance Regulation Commissioner Kevin McCarty, address to Florida Atlantic University's Executive Fourm, March 13, 2008
As you know, Florida
is the fourth most populous state in the union. What you may not know is that Florida is the third
largest insurance market, by premium, in the union. In 2007, the Florida provided over
$100 billion dollars in premium to the global market. To put this in
perspective, if Florida
were a separate sovereign nation, it would be the 8th largest insurance
market on the planet.
This $100 billion represents insurance products purchased
across all lines of insurance business, from health insurance, life insurance,
annuities, property and casualty insurance. These insurance products are
provided by primary insurance companies domiciled here in Florida, in all of the other states, as well
as internationally. The reinsurance used to support these products truly comes
from a global marketplace. Nowhere is this more evident than in our property
insurance market.
The Florida Poperty Insurance Market
Nowhere does the global insurance market come to bear on Florida more than in the
property insurance market. Of the $100 billion dollars in premium I mentioned
earlier, about $11.5 billion of that is spent on residential property insurance
(about 6.3 million policies insuring homeowners, condominiums, mobile homes,
etc.). At least an equal amount is spent on non-residential property
insurance. Over $7.5 billion is spent in
Florida just
on homeowner’s insurance.
Overall, there is almost $2 trillion dollars of insured
property in Florida.
Combined with our unique geography, this creates an interesting insurance and
risk transfer marketplace. As you may have heard, Florida is somewhat exposed to the risk of
hurricanes; and unlike many other coastal states, our exposure spans the entire
state.
The result is the Florida
property market relies more heavily on reinsurance than almost any other single
property insurance market. The direct writers cannot possibly provide the
amount of risk capital needed to finance this exposure; the ongoing business
model then requires laying off a significant amount of that risk to reinsurers.
The result is that, on a statewide average, slightly over
half of all property insurance premiums go to buy reinsurance. This reinsurance
is purchased annually in the global market place. In fact, over 90% of the
reinsurance provided in Florida comes from
outside the United States.
Florida is the single largest market for the Bermuda reinsurers, as well as the Lloyd’s reinsurers and
provides a considerable portion of annual revenue for many other continental
European reinsurers. I can remember the first time I met with some Lloyd’s
reinsurers in their boxes on Lime
Street in London
and noticed with some surprise that their desks were covered with Florida newspapers,
magazines and maps. Suffice to say, they’ve heard of us.
Other Florida markets
Property insurance is not the only market where Florida is front and
center in the evolution of insurance. Our relatively high concentration of
elderly resulted in Florida
being one of the first states to witness development of the life settlement or
viatical settlement market. This is the market where an individual can sell the
beneficiary rights of their life insurance to third parties for a cash payment
today. As this market has developed and grown, we at my agency have been
intimately involved to ensure that individuals are not being taken advantage of
or cheated. Our long-term care market advanced well ahead of most other states;
as a result, we have been active in helping to correct early mispricing and to
ensure again that individuals purchasing this product got a fair deal. We
continue to be active in monitoring the various investment products offered by
the insurance industry, not to restrict the market, but to ensure that people
know what they are getting and in fact are getting what they purchased.
|
