For two years, the Tampa Bay Times and Miami Herald have been trying to get their hands on an in-depth study of our state’s homeowners insurance market commissioned by the Florida Office of Insurance Regulation. When they finally accessed the public record, the results were not surprising. Insurance companies have been using a convoluted web of affiliate companies to cry poor while raking in billions of dollars in unreported profits.
This is hardly the first time that the industry has been caught red-handed. In 2011, The Herald Tribune won its first and only Pulitzer Prize for Paige St. John’s outstanding investigative reporting that revealed how Florida insurers used a re-insurance shell game to hide bloated profits. That revelation likewise came at a time following a historic run of supercharged hurricanes, providing insurers with a cover story for why rates were soaring.
Reinsurance is sort of like insurance for insurers, a way for them to lay off some of the risk the way a bookie might when too much action comes in on one side of a big game. The insurers complained to the FOIR that the glut of high-impact storms sent their reinsurance rates through the roof and used it as an excuse to justify rate hike requests. On the surface, this seemed plausible, given the damage caused by five years of very active hurricane seasons.
However, St. John’s reporting found that, in a striking number of cases, these opaque off-shore, tax-haven-based reinsurance companies were owned by the very companies they were “selling” reinsurance to. In other words, they weren't laying off any of the risk. They were simply paying themselves in a scam to funnel away fat returns far above the closely regulated profit margins allowed by state regulations while sticking their collective hands out for more cash from policyholders. It's what's called the upward redistribution of wealth, a form of socialism that many self-described free-market capitalists seem to adore.
This time, we see a similar con. The FOIR engaged a Connecticut-based risk and regulatory consulting firm to analyze fees paid to Florida domestic property insurer affiliates. The firm found that at the same time companies claimed they were “losing money,” they were diverting hundreds of millions of dollars in dividends to shareholders while directing billions more to out-of-state “affiliate companies,” weakening the in-state insurers, sometimes to the point of insolvency.
The services funneled to affiliate companies included “accounting, actuarial, management of investments, information technology administration, policy issuance and administration, underwriting, reinsurance intermediary services, claims investigation, and settlement.”
The firm made a number of recommendations in its report that were not followed. In fact, the report was not even released to state lawmakers. Meanwhile, a year after the report was received, Gov. Ron DeSantis and the Republican-controlled legislature (including Bradenton Senator and insurance agency owner Jim Boyd) ran cover for insurers, making it harder for policyholders to sue them for acting in bad faith.
This badly broken property insurance market has exacerbated our statewide housing crisis. Floridians have heard much bellowing and bloviations from Tallahassee over the past decade. The legistlature had special legislative sessions dedicated to insurance reform. Yet, there’s been nothing but wet kisses to the industry, which has flooded DeSantis and other Republicans with campaign contributions.
Of all the leadership failures we have experienced in Florida over the past decade—and there have been plenty—this stands head and shoulders above the rest. Homeownership has long been the number one creator of middle-class wealth, and skyrocketing insurance premiums are one of the primary factors in many Floridians’ inability to enter the housing market while also compounding the already sky-high price of rents.
What’s more, home equity is the number one asset for a majority of Floridians. Shady insurers who fail to pay claims by altering hurricane damage data have increasingly put that asset at risk, as revealed in a recent 60 Minutes expose. Allowing insurers to divert cash to affiliates to make it easier to raise rates and then claim insolvency when it is more attractive than paying claims in an active season is a betrayal of the hard-working Floridians who make our state’s economy go round—doing it as the federal government slashes funding to agencies like FEMA and NOAA ahead of the impending hurricane season is beyond reprehensible.
The 2025 legislative session kicks off in Tallahassee on Tuesday. While useless bootlickers like Joe Gruters (R-Sarasota) are busy trying to change the name of the Tamiami Trail to “Gulf of America Trail” just to curry favor with the President, let’s hope some serious lawmakers are ready to roll up their sleeves and get to work for the people. This state will not survive if it continues to be a place where deep-pocketed special interests are welcomed in to fleece the common folk so long as they write big enough checks to Ron and the RPOF.
Dennis "Mitch" Maley is an editor and columnist for The Bradenton Times and the host of our weekly podcast. With over two decades of experience as a journalist, he has covered Manatee County government since 2010. He is a graduate of Shippensburg University and later served as a Captain in the U.S. Army. Click here for his bio. Mitch is also the author of three novels and a short story collection available here.
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rayfusco68
The original concept of insurance was a not for profit shared risk structure. Today the insurance industry is a for profit corporation designed to create dividends for stock holders. There are infrastructure costs needed to run this business but the main object is to create returns for the investors not to pay claims. Since this report has traced the flow of funds generated by policy payments it should be possible to see what the actual revenues and claims costs would be without profit taking. The State could then set up a not for profit insurance program everyone could buy into. The current system is voluntary and some people choose to go bare this could work the same way or it could be mandatory and the same actuarial cost calculations used by the for profit industry would be used for either option by the State.
Sunday, March 2 Report this
GoldenGopher
We need to see the details of this study. Reinsurance is complex. The amount of $’s paid to a reinsurance company also owned by the parent company of the FL property insurer is important. And the profit/loss of that reinsurer comes from exposures and catastrophes across the country and around the world. Florida wind is a part of that profit/loss but exposure to it is closely controlled and limited.
Sunday, March 2 Report this
Ladyred4Justice
I have a question. I do not understand what this flyover does to decrease the bottleneck? Where does it start on each side? That corridor is mainly residential, including newly built high-rises along 9th Street. What is the impact on the neighborhoods below? The Village of the Arts? Maybe more easily seen from above? Living in the shadows? I'm not sure, but I think it needs a lot more exposure of the possible outcomes and who exactly it affects.
Just an aside; Downtown Sarasota has two Publix that I see regularly. They also have Whole Foods and a few specialty shops selling meats, produce, and other food items. The two-story on 301 and the one right on the Trail by Van Wezel. I suspect the same is true in Tampa and St. Pete. Really depends on exactly how you define "downtown." There is NOTHING in downtown requiring all residents to go elsewhere.
The area of the building that used to be Bank of America would accommodate a large grocery--Publix, Whole Foods, residences above with ample parking garage spaces for grocery and residents, and a penthouse restaurant overlooking the city.
The City does not know how to market. Even if they don't own the land, the can advise the owner (Ben Bakker in this case) that they would offer some tax breaks and change any necessary zoning to make it happen. We have had massive growth in residency in the downtown corridor over the last five years. The massive apartment complexes on the corner of First and Manatee, the stretch of apartments from Manatee to the River between15 to 9th Street East. The soon to open 15 story at Manatee & 9th West, the 3 story at 9th Street West & 6th Ave West, added to Westminster, a few high rise condos downtown, The condos along the river from 9th Street West to First Street, Bradenton Apartment Complex at 9th & 9th West, The Grand Palms, The Met, The Addison, soon Astoria, and all the single family homes sprinkled throughout. Furthermore, all the people who work for the County or the City and in the offices throughout downtown, need to shop for lunch or on their way home.
A food store is necessary and there are easily enough people to support one.
Just a suggestion if anyone is interested.
Monday, March 3 Report this
Cat L
Shocked. (not really shocked.) Shocked, I say ... (Florida's legislature supports shaft business, nobody's shocked) The assumption is that the workforce will move into these great apartment complexes, we'll see how that goes. I'm watching a lot of people leaving...
Tuesday, March 4 Report this