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…