ORLANDO — Time doesn't heal all wounds, not when you're talking about Florida's star-crossed property insurance market.
It has been more than eight years since a major hurricane hit Florida. A flurry of Florida-based insurers have gained strength. The state's catastrophe fund used to help pay claims after a major storm is in its best financial shape since 2006 and poised for major savings this year.
The state-run insurer of last resort, Citizens Property Insurance, has built up a $7 billion surplus, deflected costly expenses like sinkhole coverage, chopped down two-thirds of an $11 billion assessment on policyholders in three years and pushed 300,000 policies back into the private market last year alone.
"We've come a long way," Citizens CEO Barry Gilway said, noting that by the end of the week the insurer should fall below 1 million policies, down from 1.5 million policies just 18 months ago.
Yet, at an annual summit of insurance experts statewide, no one was declaring victory. Not when the average property insurance premium in Florida has reached $1,933, highest in the country and double the national average.
The cost of reinsurance, coverage that insurers buy to protect themselves from catastrophic risk, is expected to continue falling. But it's unclear how much of the savings will be passed on to policyholders through lower premiums and how much insurers will use to buy even more reinsurance.
"Either choice is good for the people of Florida," said Kevin McCarty, Florida insurance commissioner.
In a report Wednesday, McCarty said a half dozen of the state's 30 major property insurers have a recently approved or pending request for a rate cut between 2.4 percent and 9.2 percent. Given declining reinsurance rates across the board, McCarty and Chief Financial Officer Jeff Atwater have questioned whether greater relief isn't warranted.
Industry representatives at this week's meeting had a ready reason we're not seeing widespread rate reduction: Other "cost drivers" are still eating away at insurers' revenues.
John Rollins, chief risk officer with Citizens, used an illustration dissecting where each dollar in Citizens' premiums goes. Despite reforms to sinkhole payouts, 15 cents on the dollar still goes toward sinkhole claims. A stunning 28 cents on the dollar goes toward battling water-damage claims from broken water pipes, floods and leaks.
Kimberly Salmon, a partner with the law firm Groelle & Salmon, cited a growing problem with unscrupulous lawyers trying to convince contractors they are being short-changed by insurance companies paying to repair water-damaged homes. In their pitch, the lawyers allege contractors could increase their bills by 20 percent to cover overhead expenses.
Salmon said she first noticed a group of lawyers urging contractors to seek greater insurance payouts for water-damaged homes in 2010. Since then, it has mushroomed into "a cottage industry," said Michael Carlson, executive director of the Personal Insurance Federation of Florida.
Regardless the immediate impact on consumer rates, lower reinsurance rates are poised to help the state's insurance industry.
Jack Nicholson, chief operating officer of the state-run Hurricane Catastrophe Fund, said he will seek approval from the Florida Cabinet to spend up to $1.5 billion less this year on catastrophe bonds. Instead, he wants to shift some of the focus to buying more reinsurance.
In the short run, that move could increase consumer rates by about 1 percent, he said. But in the long run, it makes the Cat Fund stronger and takes Floridians off the financial hook in the event of a disaster.
Sam Miller of the Florida Insurance Council said the move would be pioneering in shifting risk back into the private market and away from taxpayers. "This would be the first time in the history of the (Cat) program they've done this," he said.
Brad Kading, executive director of the Association of Bermuda Insurers and Reinsurers, said large pension funds have recently been investing in reinsurers, which has expanded the market and helped lower rates.
Nicholson agreed: "It's a good time. Don't look a gift horse in the mouth," he said.