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Florida Gov. Charlie Crist and the state Cabinet preliminarily approved
a rule change that would lift a competitive disadvantage faced by foreign companies selling backup coverage to property insurers.

Insurance companies buy such reinsurance to cover catastrophic losses, like those often caused by major hurricanes, that exceed what they would pay out on their own.

State rules, though, now make it more difficult for foreign reinsurance companies to compete for that business because they must put up 100 percent collateral to do business in Florida, which is not required for domestic companies. The proposed change would lift that requirement for only the most secure foreign reinsurers.

“Theoretically it would affect price,” said Insurance Commissioner Kevin McCarty. “It should make a difference in availability. Greater availability should affect price.”

McCarty, though, said he’s not promising rate reductions.

The rule will be published, giving the public an opportunity to comment before the panel takes final action.

Crist, who praised the rule change, often has criticized insurance companies for raising rates even though the Legislature this year passed a new law that was expected to reduce them.

“Some of these U.S. companies have not been very good to Florida,” Crist said. “Expanding competition I think is a very good thing.”

Attorney General Bill McCollum also supported the proposal but said foreign reinsurance companies also should be required to become less secretive. McCarty agreed.

“We will proceed very cautiously,” the commissioner said. “We’re not extending this very broadly. We’re looking at companies that are well known names and have established reputations that have had relationships with Florida companies.”

Topics Trends Florida Reinsurance