While Florida-based insurance companies were losing hundreds of millions of dollars between 2017 and 2019, their affiliate companies were actually making billions.

That’s the timeframe in which Hurricanes Irma and Michael hit the state. It also marks the beginning of the industry’s latest financial crisis.

A report commissioned by the Florida Office of Insurance Regulation in 2022 shed light on this. And Lawrence Mower, Tallahassee correspondent for The Tampa Bay Times and The Miami Herald, recently got a hold of it.

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The OIR told Mower that the report could not be released when he first requested it a few years ago due to the case still being open, but records show otherwise.

“Now getting it and corresponding emails with it relating to the report didn’t look like that was the case… normally, the Office of Insurance Regulation has been pretty good about getting me records when I asked for them… this one, though, was an outlier,” he said.

Since Florida’s legislative session kicked off Tuesday, the state House speaker has ordered hearings into these findings.

Mower spoke with WUSF’s Jessica Meszaros about his exclusive reporting.

What did the analysis find?

The homeowner premiums you pay, that’s where all the revenue is coming from. So why would the insurance companies be losing hundreds of millions of dollars while the affiliates are making billions of dollars? It seems backwards to a lot of people.

So, while Florida-based insurers were saying that they’re running out of money, they were actually sending themselves a bunch of money via their sister companies that they own?

Exactly. And the reason why these companies are structured this way in Florida is because, basically, it’s hard to make money here without it. Okay?

The Office of Insurance Regulation basically caps the profits of insurance companies at around 4.5%. And if you’re trying to allure investors to Florida, one of the riskiest insurance markets probably in the world, 4.5% isn’t real enticing.

And so, what companies have done is they have a parent company, and then below the parent company is the insurance company, and then there’s a spider web of other companies that spawn off of this.

So, you’ll have companies, for example, that will handle all underwriting services. They will handle your claim. If you call and have a claim, it’ll be a sister company. It won’t be the insurance company.

But the state never saw the report, right? And instead of trying to regulate this kind of side hustle in the industry, they actually tried to solve this problem of insurers “not having enough money” by actually making it harder for insurance companies to be sued, right? As a solution to like their “hard times,” right?

Yes, that was the primary solution to the homeowners’ insurance crisis was to make it harder to sue insurance companies. However, regulators did realize that this was an issue with these affiliate companies.

First of all, it’s not really a secret. The state does these insolvency reports on companies. Well, guess what? In most of these cases, the auditors find that these improper payments to affiliates were basically inflated, and that’s the reason why, or at least a major contributing factor of why these companies go under.

So, regulators knew about this, and they commissioned this report. They got the findings in March of 2022, and did not share that with anyone. The question is, why not release this report?

What’s being done now to try and regulate these shady practices?

Well, the Office of Insurance Regulation does want more powers. They want also to change the way these fees are structured. So, right now, the affiliate companies will charge the insurance company, you know, up to 34% of premium dollar, basically, which is a lot of money. And what OIR wants is to make it a flat fee.

So, what are you going to be keeping an eye on this upcoming legislative session?

You know, OIR has their bill out there. There’s also legislation that would require the state to better report the compensation of insurance companies’ executives -that’s out there. There’s a variety of legislation that’s coming down the pike that would basically change how claims are handled after storms.