Tallahassee, Fla. – Florida insurance companies claimed they lost money in the wake of Hurricanes Irma and Michael, but a study obtained by The Times/Herald shows that parent and affiliates are billions He was making dollars.
The start of the state insurance market meltdown came just after these two storms between 2017 and 2019.
However, these financial difficulties are not said to have been released to The Times/Herald after two years of public records, according to a 2022 survey that has never been published.
The report is the deepest in Byzantine finances in Florida’s homeowners insurance market, with executives giving shareholders a $680 million dividend as the industry is sick and businesses are losing money. It was revealed that while distributing it, it diverted billions of dollars to businesses.
Most Florida-based insurance company executives were violating state regulations as they removed so much money from businesses, the research authors concluded.
As a result, some insurers have become financially weak and potentially unable to pay their claims towards the depths of the state’s insurance crisis.
State lawmakers have never seen the report.
The state’s then-insurance committee and Gov. Ron DeSantis made it difficult to sue the insurers, focusing on legal reforms.
Also, despite recommendations from the report’s authors, regulators have not repeated the research.
The findings are “smoking guns” that confirm what has long been suspected in the Florida market, said Doug Quinn, executive director of the Watchdog American Policyholders Association.
“These companies are screaming for poverty to raise premiums and justify bankruptcy. “It’s a lawsuit, it’s a fraud,” Quinn said. “This is money that moves from the left pocket to the right, and makes poverty cry while the right pocket is bulging.”
State regulators say insurance markets are different today. In recent years, Florida insurance commissioner Mike Yaworski has been seeking more surveillance from affiliate companies. This year, he is asking lawmakers to change how insurance companies pay their affiliates.
The report is an incomplete photograph of insurance companies’ money, but the Florida Department of Insurance Regulation said in a statement that the study asserts that the reforms the office wants are guaranteed.
However, Paul Handan, founder of the Federal Association of Member Trade Groups, including insurance companies, disputed the idea that executives were intentionally moving money.
“This notion is not happening that it’s not happening when they escape their policyholders and offshore money to their affiliates,” Handerhan said. “None of these guys used this as a strategy.”
During a debate in Congress about how best to respond to the insurance crisis from 2018 to 2023, some lawmakers asked what role the affiliate companies played.
Rep. Hillary Cassel of R-Dania Beach said there was a lack of data on affiliates known as “general agent management” when lawmakers and observers were voting for the law.
“We’re all in the trouble that we’ve been notified about issues that we know are common agents management),” said Cassel, a former lawyer at the insurance company currently suing them. Masu.
The Insurance Regulation Authority said in a statement that the study was not given to lawmakers because it was “not a formal examination report.” It was produced a few months before lawmakers met at the emergency legislative session in 2022 and remained in “draft” status.
“Our office does not release all internal analysis of the company to Congress,” the office said.
The Times/Herald requested a report in November 2022, but the office did not take over the executive summary until December 2024.
The affiliate structure is nothing new in Florida.
Insurance companies’ profits are limited by regulators to around 4.5%, making them almost unattractive to investors given the risk of hurricanes.
However, Florida insurance executives were able to use financial workarounds to reward investors and themselves.
Insurance companies’ profits and executive compensation are kept at a cap, but affiliate marketing and parent company’s profits are not.
Therefore, executives create sister companies that claim insurance companies for basic services such as claiming claims, underwriting, accounting, issuance, etc. (Large national insurance companies usually handle all of these services internally.)
It states that arrangements between insurers and affiliates must be approved by the state and regulations must be “fair and reasonable” not defined by state law.
The structure of a company can look like an entity’s spider web. When Fednat Insurance went bankrupt in 2022, it was one of nine companies under its parent company.
When Southern Fidelity Insurance broke up that year, it was one of six companies under the same umbrella, and its holdings included a hunting lodge that was maintained at a cost of $485,000 a year. According to an October Insolvency Report, state officials were investigating whether they had “taken aggressive steps to hide these costs” from regulators.
Most Florida insurance companies have similar arrangements, which is very advantageous for some executives who have been the highest wage in the country in a few years.
However, according to the National Association of Insurance Commissions, this type of setup can be easily abused and requires greater regulatory scrutiny.
This is because the owners of the insurance company also own affiliates, and executives created an incentive to overcharge their services in the insurance company.
Such abuse has been repeatedly discovered by state officials as a reason why businesses are insolvent. During the 2009 bankruptcy, the auditor wrote that management was “stripping out of cash companies” while it was out of business. Last year, rating agencies discovered the best of the year. Affiliate relationships have found that after catastrophe losses and fraud, the third leading cause nationwide between 2000 and 2022, the Insurance Journal reported.
Still, it is unlikely that Florida regulators would have known the full scope of insurance changing insurance coverage until 2021, when they gave insurance companies and affiliates the ability to request more information.
Using that power, David Altmaier, the state’s then-command, paid almost $150,000 to a Connecticut-based consultant to analyze the information the company provided. Research shows that some companies are taking over incomplete data.
Between 2017 and 2019, the insurers in the survey (minus some outliers) showed a net loss of $432 million.
Their affiliates showed net profit of $1.8 billion.
The survey shows that all 53 companies are included, with the industry recording a net profit of $61 million, while affiliates earning a net profit of about $14 billion. These figures could include domestic airlines that also offer auto insurance.
The author said the Florida-based affiliate is profitable even after injecting $485 million into insurance companies and giving up a $208 million fee over three years. .
In the author’s opinion, 19 of the 30 Florida-based companies that provided the data paid fees to “fair and inappropriate” affiliate companies.
The numbers in the study are “eyes-dazzling,” and raise questions about why regulators would allow such financial arrangements, said Birny Birnbaum, former chief economist at the Texas Department of Insurance. It’s there.
“It’s unclear why (the Insurance and Regulation Authority) hasn’t done anything about it,” Birnbaum said.
This year’s regulators are asking lawmakers to define “fair and reasonable” to include the actual costs of the services offered, the overall health of the insurance company, and the amount of dividends. Regulators sought it in 2023, but lawmakers refused, claiming it would “sway the Apple Cart” of Florida’s insurance industry.
The proposed law of the office also requires affiliates to pay the fees in an amount rather than a percentage. Affiliates typically charge 20% to 34% of insurance premiums from an insurance company, and will bring more money to affiliates when premiums rise.
The office has cancelled or changed contracts for some companies. For example, in 2023, one company’s contract with affiliate marketing was cancelled. It was cancelled after the regulator discovered that affiliates were charging additional fees in addition to the costs of services offered to insurers.
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©2025 Tampa Bay Times. Visit tampabay.com. Distributed by Tribune Content Agency and LLC.
Original issue: February 24th, 2025, 7:07am EST
