Florida Commissioner McCarty Saying Goodbye: ‘It’s Been a Labor of Love’

“It’s not for the faint of heart, I can tell you that… Anyone who comes in here and thinks it’s an easy job really does not have any idea what they’re getting into. But it’s been a joy鈥� It’s been a labor of love for me to serve in this capacity. It’s been a great challenge, but it’s been a great reward as well.”

That’s how Kevin McCarty signed off his last interview as Florida Insurance Commissioner with Insurance Journal after a nearly 13-year career serving the state. McCarty announced in January he would leave office in May to pursue “other opportunities.”

Retrospective, candid, and modest, McCarty talked about what issues have affected him the most during his tenure and said he hopes his legacy will be remembered as one of fairness and respect.

“I think I’ve prided myself and promoted within our organization a culture of what I consider fair hearing. I want everyone to know that everyone who comes to the Florida Office will be given a fair hearing, and that we’re not predisposed on one side or the other,” McCarty said. “As the insurance commissioner of a state as diverse as Florida, it’s important that we have listened to stakeholders. I think that’s what we’ve done.”

McCarty said his advice to his successor, who may be chosen by the Florida Cabinet on April 26, is to consider the many different backgrounds and experiences of those he or she will work with and serve.

“I think that the most important thing is to come here with an ability to listen to the advice and counsel of a variety of people, and to make it a practice to ensure that you’re getting the benefit of all the information and taking in all of the stakeholders’ positions before you make a decision,” McCarty said. “The best, to me in my mind, is someone who is experienced in judgment and can take in a balance of opinions and use the benefit of their experience 鈥� that would be the best background, I think, to be a good insurance commissioner in our state or in any other state.”

That person doesn’t necessarily have to be someone who has experience in Florida, McCarty said, though he does think someone from the state would have an advantage in dealing with catastrophe risk. McCarty noted, however, that property insurance is only one aspect of the Florida insurance market.

“I don’t think anyone should be discounted, either in the state or outside of state. I think what’s important is to have somebody who can strike the balance between protecting consumer issues, and understand[ing] the importance of a robust and competitive market,” McCarty said. “Every decision you make can affect millions of people directly or indirectly.”

McCarty said balancing working with insurance companies versus protecting the consumers is part of the job that he has taken very seriously.

“I think striking that balance is very important because I firmly believe that capital markets work 90 percent of the time, just like life insurance works 99 percent of the time,” McCarty said. “I think the [government’s role] has to be very strategic, and it needs to be a very limited role for those people who need it 鈥� those are the ones that will benefit from it.”

Other highlights from McCarty’s podcast interview:

On Strength of Florida Insurers

McCarty said his successor will be inheriting a Florida property market that is in the strongest position it’s been in in a decade. It has seen back-to-back years of profitability, he said, and the reinsurance market is also very strong.

McCarty also touted the stability of Citizens and other insurers in the state.

“Through our stress testing last year, we’ve seen that our companies can withstand a Hurricane Andrew or the 2004 or ’05 seasons. We’ve even seen Citizens get to the point where they could successfully take a 1鈥慽n鈥�100鈥憏ear event without doing an assessment, which is pretty remarkable,” he said.

McCarty disagreed with claims from some that Florida’s domestic insurers that have entered the market in the last 10 years haven’t been tested and would falter if a big storm hit the state.

He said many of the newer insurers domiciled in Florida don’t just write in the state and have been tested by catastrophes in other regions.

“Those are things that we look at in addition to their ability to maintain the capital position. Some of these companies have been tested in other areas. They were in the Northeast for Superstorm Sandy, and paid claims during that time,” he said. “We’ve seen some of our companies tested in that regard, and have met that challenge. I feel good about it.”

That said, McCarty added, not every company is destined to succeed.

“There will be failures in any scenario. We’re in the risk assuming business, and when you’re in the risk assuming business you’re going to have companies that fail. That’s just a reality,” McCarty said. “I think the overwhelming majority of our companies are positioned in terms of managerial skills and abilities, in terms of their underwriting, in terms of their financial capacity and wherewithal to withstand a series of catastrophic events.”

On Ongoing Florida Challenges

McCarty said flood insurance is an ongoing issue for the state as the National Flood Insurance Program’s (NFIP) rates continue to go up and the program goes further into debt. McCarty said Florida pays the highest flood insurance rates in the nation and has been a “net donor鈥o the rest of the country.”

McCarty has worked with several Florida legislators on addressing the flood insurance rate problem. Last year he requested ratemaking data from the Federal Emergency Management Agency (FEMA) of Florida policyholders.

The Florida Office of Insurance Regulation (OIR) and Florida legislators have also passed laws encouraging insurance companies to offer flood insurance in the state to increase competition and give residents other options. But he says more will need to be done.

“I frankly don’t know how my successor can ignore that issue. So much of the Florida marketplace dominates the federal flood program鈥 don’t know how anybody who is insurance commissioner of Florida can ignore the federal flood program and the alternatives to the Federal Flood Program,” he said.

The skyrocketing increase in water loss claims as a result of what many are claiming is abuse of policyholders’ assignment of benefits (AOB) is another issue McCarty sees as a top priority for his successor.

One order of business in his final months was to approve policy form wording changes submitted by Citizens Property Insurance to encourage policyholders to contact Citizens first in the event of a water loss. He said additional proactive steps should be taken by other insurers to protect policyholders and help address the issue.

“We have been encouraging companies to look at the Citizens’ filings, but it is important to note that this is not a cutting of benefits,” McCarty said. “We worked very hard with Citizens to craft a balance to make sure that the language that has always been intended is in the contract.”

McCarty said the workers’ comp market is another area that will need to be closely watched. While rates have gone down consistently since reforms were passed back in 2003, cases currently before the Florida Supreme Court could impact this market going forward.

“Any one of those cases could wreak havoc in the marketplace, and we would have to be poised to take whatever necessary legislative action to ensure stability in the marketplace,” McCarty said.

Read Part 2 of Commissioner Kevin McCarty’s interview where he discusses how he’s changed his approach to the position through the years, what he considers to be OIR’s biggest achievements during his tenure, and what’s next for him after leaving OIR:

Part 2 of Insurance Journal’s outgoing interview with McCarty
To hear the interview in its entirety, click on the podcasts below:

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