Figure 2
|
Figure 2 shows the number of receiverships since 1967. Note the large increase in receiverships in the ten-year period from 1984 to 1993. There are two basic reasons for the substantial increase in the number of receiverships during this time period. The first has to do with the general financial stress felt in the late 1980s in response to problems in the savings and loan industry and the significant drop in the stock market that occurred in October of 1987. Although neither of these occurrences directly involved the insurance industry, the nature of the insurance industry’s general involvement in financial matters, compounded with stock investments held as assets by individual insurance companies to meet minimum surplus requirements, assured that the impact on the industry was significant. The second great impact in this time period was Hurricane Andrew, which passed through South Florida in August of 1992. The storm left a path of destruction 25 miles wide and 60 miles long. The Hurricane Insurance Information Center reports that Floridians filed more than 725,000 claims related to Hurricane Andrew. The total in property damage reached nearly $40 billion when indirect and continuing costs were considered. This made Hurricane Andrew the most expensive natural disaster in U.S. history until Hurricane Katrina in 2005. Obviously, this type of claim activity and the total costs involved put a severe stress on the insurance industry in Florida (see Figure 3). Several insurance companies went into receivership directly as a result of this devastating storm. Because of lessons learned from Hurricane Andrew, the insurance industry was prepared to handle the influx of claims in 2004 when a record four hurricanes made landfall in Florida within a six-week period and in 2005 when three hurricanes made direct hits and one brushed by the state. According to the Report for the 2004-2005 Hurricane Seasons prepared by the Florida Office of Insurance Regulation, 2.7 million hurricane claims were filed in 2004 and 2005. However, only one insurance company in 2004 and three insurance companies in 2005 entered receivership as a direct result of losses during the 2004 and 2005 hurricane seasons. One insurance company that wrote homeowners policies voluntarily consented to receivership primarily as a result of the cancellation of its reinsurance on June 30, 2006. |
Figure 3
Florida Hurricane Losses by Decade
| Note that the total number of companies in receivership at the end of a fiscal year peaked in 1991 at 103, but stayed high throughout the early 1990s as the result of Hurricane Andrew and fluctuation in the national economy. It was not until a large number of companies were discharged from receivership during the years 1993 through 1995 that the number of estates being managed by the Division returned to the mid-1980s level. Figure 4 exhibits the historical trend in the number of companies entering receivership and the number of companies being discharged each year. |
Figure 4
Number of Receiverships and Discharges by Year
(1967-2007)
| The types of insurance companies that historically enter receivership have changed some over the years. Although companies selling property and casualty insurance are still the most common type in receivership, the number of companies classified as health maintenance organizations, service warranty companies, and unauthorized insurers has increased. Historically, companies classified as life and health once were more likely to enter into receivership than they are today. Figure 5 provides a breakdown (in percentages) of all the different types of insurance companies that have entered receivership in Florida over the past 45 years. |
Figure 5
Types of Companies that Historically Enter Receivership
| Another historical development related to the types of companies that enter receivership is the trend toward more companies in receivership having the state of Florida as the domiciliary state (the state where incorporation took place). Figure 6 shows that historically slightly more than half of the estates that have entered receivership have had Florida as the domiciliary state. |
Figure 6
The Percentage of Companies in Receivership Where Florida is Historically the Domicile State
| Today, 90% of the companies in receivership in Florida are domiciled in the state of Florida. This trend is likely the result of various factors, including the tendency for companies domiciled in other states to not have assets located in Florida so as to require a receivership to be opened in this state. |
