Hurricane Reinsurance

Published November 9, 2010

The Oct. 24 article “Florida’s Hurricane Insurance Premiums Largely Determined Overseas” [front page] draws some useful attention to the often-misunderstood world of reinsurance but makes several significant factual errors in the process. Most importantly, perhaps, the article’s core allegation that Floridians have “never before” paid premiums at the levels they do and “never before received so little benefit” for it is simply false.

In fact, Florida insurance premiums have fallen 15 percent since 2007. Likewise, Floridians have collected billions for reinsurers. During the more recent bad storm season, Floridians and residents of other Gulf Coast states collected more than $20 billion in payments from Bermuda reinsurers alone. This isn’t a small amount. Without offshore reinsurance, indeed, it’s unlikely that private homeowners’ insurance would exist at all in the State of Florida.

The problems of Florida’s homeowners’ insurance market aren’t the result of rapacious offshore reinsurance companies but, rather, a system that has persistently overregulated the rates that insurers charge and mandated their purchase of underfunded taxpayer reinsurance from a state agency, while abdicating the state’s responsibility to ensure that those same insurers remain solvent and able to pay claims.

Florida’s insurance system is badly broken, but offshore reinsurers aren’t the problem.