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Home / Insurance / How Florida Insurance executives siphon off millions and leave their companies bankrupt | Property Insurance Protection Law Blog

How Florida Insurance executives siphon off millions and leave their companies bankrupt | Property Insurance Protection Law Blog



Insurance companies are heavily regulated to protect themselves from financial ruin, leaving policyholders without the promised financial safety net. Historically, many insurance companies would charge unsound actuarial interest rates, take premiums or surpluses from the treasury and give it to the insurance company executives, making illusory insurance contracts that paid little after a loss. This is why the industry is regulated on a state-by-state basis.

An article written by journalist Lawrence Mowry: Insurance executives in Florida saw big payouts in years without hurricanes, helps shed light on why Florida’s insurance companies have become private piggy banks for their investors and executives while failing to build surpluses and solvency in non-hurricane years. The article noted:

In 201

5, State Farm’s CEO earned $13.3 million overseeing America’s largest property insurance company.

That same year at Tampa-based Heritage Insurance Holdings, one of many small Florida-based homeowners insurance companies, its CEO earned $27.3 million — despite overseeing 0.3% of State Farm’s policies and accounts.

Florida-based insurers have gone out of business in recent years or raised rates by double digits. Industry groups and Gov. Ron DeSantis have blamed excessive litigation, and Republican lawmakers are poised this week to limit incentives to sue insurers.

But state lawmakers have largely ignored an issue that has been directly blamed for many past corporate failures — and allowed some executives to make eye-watering sums of money over the past decade, when companies were highly profitable thanks to years without a storm.

Between 2014 and 2018, the CEO of Fort Lauderdale-based Universal Insurance Holdings earned between $14 million and $25 million each year, company filings show. The company has scaled back its policies in Florida over the past year.

At St. Petersburg-based United Insurance Holdings, whose insurance arm fell under state supervision last week, awarded the company millions of dollars in stock dividends, most of which went to company executives and directors, even as its profits shrank, according to company filings.

…While Florida insurance companies are closely regulated, with caps on payouts and profits, their parent and sister companies are largely unregulated.

Government regulators have long been aware of the dangers of outsized arrangements between insurance companies and their sister and parent companies.

Big payouts to executives were at the heart of the biggest insurance company collapse in state history: the 2008 failure of Tampa-based Poe Insurance Group, which left Floridians on the hook for about $850 million in outstanding claims from the 2004 and 2005 storms. The state sued to recover $143.5 million in dividends the company paid out to owners and their family members between 2004 and 2005.

Since then, excessive payouts have been a consistent theme among the graveyard of failed companies. Financial autopsies of companies that went bankrupt between 2011 and 2018 have repeatedly blamed high wages and fees on affiliated companies. In one case, the autopsy said an insurer’s officials “stripped.” [their] company of cash.’

How did this happen? Where have the Florida regulators been when they have allowed these abuses? Why weren’t laws and regulations made to prevent this? Many of these elected officials voting today on the proposed legislation, which will strip longtime policyholders of their rights, have received millions in campaign contributions, often through private political action committees (PACS).

There must be full transparency of these affiliated companies, their relationships and the money being laundered through management agreements and joint ownership. Then we need regulatory leaders with courage and effective laws that allow them to fairly regulate the regulated. Currently, it appears that Florida’s regulatory and political leadership is completely in bed with insurance company executives and investors to help hide these hidden payments from insurance company coffers, which should be there for policyholders.

Today’s thought

There is a sufficiency in the world for man’s needs but not for man’s greed.
– Mahatma Gandhi


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