\u201ctrade secret.\u201d<\/a><\/p>\nFor instance, the report says, Security First Insurance reported about $27 million in losses while affiliates receiving 30% of the insurer\u2019s gross written premiums earned over $50 million in net income. PURE Insurance, a \u201creciprocal exchange\u201d insurer geared toward high net worth homeowners, claimed $9 million in losses while paying 22% of gross premiums to affiliates that earned $176 million, according to the report.<\/p>\n
In contrast, Homeowners Choice Property & Casualty Insurance Co. reported $28.7 million in net profit for its insurance operation but $85 million in net income for its affiliates, which received 28.5% of the insurer\u2019s gross written premium, the report said.<\/p>\n
Based on those comparisons, the consultant RRC deemed the insurers\u2019 affiliate payments \u201cpresumed not to be fair and reasonable\u201d in all three cases.<\/p>\n
In advance of publication, the Sentinel and Sun Sentinel reached out to executives at insurance companies flagged by the consultant for affiliate fees that were presumed to not be \u201cfair and reasonable,\u201d summarizing the report\u2019s analysis of their company\u2019s operations. Most did not respond, but several did.<\/p>\n
Those industry representatives objected both to the report\u2019s methodology and its premise, calling the affiliate structure a standard framework that is highly scrutinized by state insurance regulators. They noted that affiliates often give money back to insurers as capital contributions to bolster the companies\u2019 finances, a practice also noted in the consultant\u2019s report, and objected to any notion their fees are not fair and reasonable.<\/p>\n
Security First Insurance CEO Locke Burt said his company\u2019s affiliated agreements are in line with what the services would cost on the open market, and the report doesn\u2019t capture the total picture of Security First Insurance\u2019s finances.\u00a0 He said his company lost about $150 million from 2017 to 2022, requiring the owners to contribute about $25 million and borrow over $100 million to keep the business afloat.<\/p>\n
\u201cThe narrative that the subsidiaries and MGAs are a clever way to hide money is absolute nonsense,\u201d he said, referring to a managing general agent, a type of affiliate given authority to underwrite and price risk on behalf of insurers.<\/p>\n
Paresh Patel, CEO of HCI Group, which includes Homeowners Choice and TypTap Insurance, said in a statement the consultant\u2019s \u201carbitrary standard of what is deemed fair and reasonable\u201d used limited data and wasn\u2019t applied consistently among companies.<\/p>\n
\u201cOverall, we think the analysis was biased against the single state carriers that supported Florida in a time of crisis,\u201d Patel said.<\/p>\n
PURE also objected to any implication that its fees are not fair and reasonable.<\/p>\n
\u201cA presumption in an unfinished draft is not a finding. \u2026 PURE\u2019s reciprocal structure is a key reason behind PURE\u2019s exceptional service record, and PURE disputes any characterization of its attorney-in-fact arrangement as other than fair and reasonable,\u201d said Kristin Piccini, a company spokeswoman. Piccini said the consultant also overlooked that PURE\u2019s key affiliate, referred to as an attorney-in-fact in its \u201cmember-owned\u201d reciprocal structure, \u201cprovides substantial and explicit capital support to the reciprocal insurer.\u201d<\/p>\n
The newly released documents underpin an executive summary of the consultant\u2019s report that was first made public by the Miami Herald and the Tampa Bay Times in early 2025. That revelation led to hearings in the Florida House and efforts to boost state oversight of affiliate transactions.<\/p>\n
The Senate\u2019s recent demands to squelch the report have sparked renewed, bipartisan calls for greater consumer transparency in the future.<\/p>\n
In a social media post, Republican candidate for governor Byron Donalds blasted efforts to hide insurer finances as \u201cunacceptable,\u201d vowing to \u201ccreate a first-of-its-kind Insurer Scorecard and reform regulations so that insurance companies cannot secretly overcharge consumers.\u201d<\/p>\n
Gwen Graham, the running mate of Donalds\u2019 Democratic opponent David Jolly, weighed in too on social media: \u201cIt is time for change in Tallahassee. Time to put Floridians first,\u201d she wrote.<\/p>\n
Not a new issue<\/p>\n
The use of affiliates has been a recurring debate in Florida\u2019s insurance market.<\/p>\n
Florida, like other states, controls the rates insurers may charge their customers. In rate-setting, regulators typically use a profitability benchmark of about 4.5% for the primary insurer. But they do not directly limit or cap the profits of the insurers\u2019 affiliates, which consumer advocates say can create an incentive for companies to make higher returns with that part of their business.<\/p>\n
State regulators review contracts with affiliates and evaluate how much is being charged to the insurer, said Jane Nelson, the Office of Insurance Regulation\u2019s deputy commissioner of property and casualty. State lawmakers provided insurance regulators in 2021 with expanded authority to examine the finances of affiliates.<\/p>\n
\u201cWe\u2019ve found contracts before that we\u2019ve said, \u2018This is not reasonable. This is completely unreasonable,\u2019 and we\u2019ve made them unwind the contract, affiliates pay back money to the company and then to start over with a contract that we did deem to be fair and reasonable,\u201d she said.<\/p>\n
Such regulatory actions are confidential, state officials said in declining to give examples.<\/p>\n
Jeff Brandes, chairman of Patriot Select Property & Casualty Insurance Co. and a former state senator, said affiliate structures are a \u201cfeature\u201d not a \u201cflaw,\u201d candidly acknowledging they allow insurers to boost overall profits.<\/p>\n
\u201cNobody would run any insurance business in Florida for a 4.5% return,\u201d said Brandes, whose company launched in 2025 after he left the Senate and was not part of the study. \u201cYou can\u2019t make money, and you can\u2019t have investors to do that. You would never get a nickel in your company.\u201d<\/p>\n
That, he said, would be bad for consumers. As new insurers enter the market and seek customers, increased competition brings down premiums, he argued.<\/p>\n
But the use of affiliates has also drawn scrutiny \u2014 in part because it is difficult for consumers to know if companies are paying a market rate for the services they are getting, or perhaps paying much more.<\/p>\n
Publicly available financial data show that many of the issues identified in the consultant\u2019s study with affiliate payments continue today in Florida.<\/p>\n
A Sentinel\/Sun Sentinel review indicates that payments to affiliates by key Florida insurers in 2025 fell in a range from 20% to 35% of direct premium, about the same range the consultant found from 2017 to 2019. The news organizations did not have access to affiliate profit numbers, which are not generally public.<\/p>\n
Florida should be doing more to crack down on excessive payments to affiliates, said Birny Birnbaum, director of the Center for Economic Justice and a former chief economist at the Texas Department of Insurance.<\/p>\n
\u201cThe problem has been identified, certainly remains today and if anything else, it is worse,\u201d he said.<\/p>\n
Pressed in 2025 by state lawmakers in a hearing, Jan Moenck, one of the individuals who worked on the RRC consultant\u2019s report, said it wasn\u2019t within the scope of the review to decide if the Office of Insurance Regulation failed to enforce the law on affiliate fees. She answered \u201cno\u201d when asked if she found any financial practices potentially in violation of state insurance regulations.<\/p>\n
In the wake of those hearings, the Florida House voted 106-3 earlier this year for legislation to give regulators more authority to scrutinize insurers\u2019 affiliate transactions. But the measure died in the Senate.<\/p>\n
The House would have required insurers to submit more information to regulators detailing affiliate payments and would have set standards for evaluating whether they are fair and reasonable. The factors included the relative financial condition of the insurer and the affiliate, the amount and purpose of dividends and whether affiliate agreements are in the best interest of policyholders.<\/p>\n
House members also promised last year to undertake their own, updated \u201cforensic audit\u201d of affiliate payments, a project that appears to have been abandoned.<\/p>\n
The report\u2019s history<\/p>\n
Initial work on the analysis of affiliate fees started in late 2020 as part of a broader contract and focused on a sample of 16 insurers deemed to be at the highest risk of insolvency,\u00a0 Moenck said in her testimony to lawmakers.<\/p>\n
A memo was delivered to the state\u2019s director of property and casualty financial oversight on March 31, 2021, for the first batch of companies, conducted by Wayne Johnson, a former Florida OIR official who then worked for RRC. Moenck said RRC was engaged on Oct. 14, 2021, by the Office of Insurance to analyze all the remaining Florida insurers, and the expanded report was provided to state officials in April 2022.<\/p>\n
Yaworsky, who became insurance commissioner in March 2023, told legislators he became aware of the report in 2024, and that many of the recommendations in the report had been \u201corganically\u201d implemented internally.<\/p>\n
But Yaworsky and the Office of Insurance Regulation have stepped up their criticism of many aspects of the report.<\/p>\n
State regulators said they found validation issues with the net income of affiliates and inconsistencies between data points in the draft report and financial statements and holding company filings, among other issues. Officials have declined to identify any specific inaccuracies in response to a request from\u00a0the Sentinel and Sun Sentinel, however, saying that doing so would likely require the use and disclosure of protected information.<\/p>\n
The examination didn\u2019t consider economic factors insurers faced at the time, such as surging reinsurance costs and the \u201cefforts companies made to adapt to a quickly deteriorating legal environment and years of multiple-event storm seasons,\u201d according to the agency\u2019s statement.<\/p>\n
Risk & Regulatory Consulting did not respond to a request for comment on Florida\u2019s objections to its work. But in her March 2025 testimony to lawmakers, Moenck, the consultant, said she viewed the report as complete, and state regulators did not request changes or express concerns with the report\u2019s methodology or conclusions.<\/p>\n
Data reporter Haiyi Bi contributed to this article.<\/p>\n","protected":false},"excerpt":{"rendered":"Ten days ago, the Florida Senate demanded that the Orlando Sentinel and South Florida Sun Sentinel destroy a…\n","protected":false},"author":2,"featured_media":410251,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[558,28,30,29,27089,114,266,115,480],"class_list":["post-410250","post","type-post","status-publish","format-standard","has-post-thumbnail","category-florida","tag-business","tag-florida","tag-florida-headlines","tag-florida-news","tag-florida-property-insurance","tag-latest-headlines","tag-local-news","tag-news","tag-real-estate"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-fl\/wp-json\/wp\/v2\/posts\/410250","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-fl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-fl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-fl\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-fl\/wp-json\/wp\/v2\/comments?post=410250"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-fl\/wp-json\/wp\/v2\/posts\/410250\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-fl\/wp-json\/wp\/v2\/media\/410251"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-fl\/wp-json\/wp\/v2\/media?parent=410250"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-fl\/wp-json\/wp\/v2\/categories?post=410250"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-fl\/wp-json\/wp\/v2\/tags?post=410250"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}