Florida Insurance Companies Hide BIG Profits to Raise Homeowners Rates

Florida Insurance Companies Hide BIG Profits to Raise Homeowners Rates

Meteorology Matters summarizes the findings of a 2022 report commissioned by the Florida Office of Insurance Regulation (FLOIR) analyzing fees paid by Florida domestic property insurers to their affiliates between 2017 and 2019. This internal report, recently brought to public attention by the Tampa Bay Times/Herald in a February 2025 article, reveals significant financial activity between insurers and their affiliates, including substantial net income for affiliates while some insurers experienced net losses (excluding outliers). The analysis raises concerns about the "fair and reasonable" nature of these affiliated agreements, the potential for misuse of Managing General Agent (MGA) structures, and the need for enhanced regulatory oversight.

II. Main Themes and Important Ideas/Facts:

A. Scope and Methodology of the FLOIR Analysis:

• The FLOIR engaged Risk & Regulatory Consulting, LLC to analyze fees paid by 53 Florida domestic property insurers to their affiliates over a three-year period (2017-2019). This period was chosen to avoid single-year anomalies.
• The analysis considered various factors, including gross written premiums, total affiliated fees, percentage of fees to premium, number of policies, net income of insurers and affiliates, capital contributions, fee waivers, and dividends.
• The evaluation of whether fees were "fair and reasonable" considered Florida Administrative Rule 69O-143.047, NAIC accounting principles, and guidance from the NAIC Financial Analysis Handbook.
• Forty-one (41) of the 53 reviewed companies utilized an MGA or Attorney-in-Fact (AIF) to administer operations.
• Compensation methods for affiliated and non-affiliated agreements varied widely, including percentages of premium, hourly rates, fixed fees, commissions, and combinations thereof.