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Insurance may rise another 2 percent

About 19,400 unpaid claims by defunct Poe Financial Group left the state holding a $300-million bill. Guess who might pay.

By TOM ZUCCO
Published June 15, 2006

Property owners in Florida could be hit with yet another addition to their insurance bill: an assessment to help cover part of the record $300-million in unpaid insurance claims left by Tampa's now-defunct Poe Financial Group.

When Leon County Circuit Judge Janet Ferris signed an order May 31 liquidating Poe's three property insurance companies, most of Poe's 320,000 policyholders were sent to Citizens Property Insurance Corp., the state-run insurer of last resort.

The order also sent the remainder of Poe's unpaid claims, about 19,400 in all, to a state-created nonprofit corporation called the Florida Insurance Guaranty Association. Made up of insurance companies operating in Florida, FIGA covers claims of its members if they become insolvent.

The unpaid Poe claims represent a projected loss of about $300-million, or about $200-million less than FIGA has on hand.

How much Florida's policyholders will be assessed has yet to be determined, Michelle Lovern, FIGA's deputy director, said Wednesday. In order to recoup some of the money, Lovern said, Poe assets will be liquidated, reinsurance will be collected, funds will be provided from the Florida Hurricane Catastrophe Fund and bonds may be issued by FIGA.

And, as it did after Hurricane Andrew struck in 1992, FIGA could assess insurance companies as much as 2 percent of the value of their premiums.

That assessment could cost insurers an estimated $200-million - an expense that typically would then be passed on to consumers, who already face another year of double-digit rate hikes and assessments to cover deficits from the last two hurricane seasons.

It's too early to tell, Lovern said, if an assessment is needed or how much it will be. It could, she acknowledged, be the full 2 percent.

"We have so many resources," Lovern said. "But if an assessment is levied, companies make a rate filing to recover it, and then roll that into the next premium cycle."

Any assessment would include both residential and commercial property insurance policyholders.

While no one has come up with final figures regarding an assessment, a hint of what could happen can be found in FIGA's response to Andrew.

FIGA has assessed property insurers the maximum of 2 percent only once recently - after at least six insurers were declared insolvent in the wake of Hurricane Andrew.

But FIGA has never been faced with a shortfall the size of the one it faces now.

Lovern, however, said she was not overly concerned. "We're pretty accustomed to this," she said. "There are a lot of things out there lined up."

In the meantime, the state remains locked in a legal dispute with Poe. Lawyers for the Florida Department of Financial Services responded Wednesday to a motion Poe filed this week in Leon County Circuit Court seeking to vacate Judge Ferris' order approving the state's plan of liquidating the insurer.

In response, DFS attorneys said Poe wants to continue to earn millions of dollars in commissions for policies its companies wrote, including management fees.

As the court-appointed receiver, DFS said Poe has collected more than 25 percent of the commissions and fees and deserves no more.

A hearing on the motion is scheduled for today in Tallahassee.

Tom Zucco can be reached at zucco@sptimes.com or 727 893-8247.

[Last modified June 15, 2006, 05:39:42]