Barn Burners II

Last week you read of a hatchet job by the Palm Beach Post.  Writer Charles Elmore was hell bent on connecting the rates and underwriting of Citizens with the international travel necessary to save $233 million on reinsurance premiums.

Anything favorable to Citizens, or the reinsurance deal it secured, was sullied with Elmore’s fact selection, the words he put in the mouths of others, sales puffery he cut/pasted from travel brochures and spa pictures downloaded from the internet.

Not a good day for journalism.

Jay Neal, with FAIR (the Florida Association for Insurance Reform) rebuked the attack  highlighting, as he did, the ulterior motives and  lack of professionalism by both the Post and Elmore.

I supported and expanded on Neal’s criticisms with my piece; The Palm Beach Barn Burners!

I’ve since communicated with both Jay Neal and consumer advocate, Bill Newton with FCAN (The Florida Consumer Action Network), for their thoughts.

Newton wrote a piece, also published by the Post, explaining why the purchase of reinsurance was appropriate. The telling thing is that Elmore didn’t publish the thoughts of either consumer advocate in his original piece. This, despite two interviews in which Neal said the reinsurance purchase was appropriate and that focusing on travel expenditures was “petty”.

Speculation as to why Elmore twice interviewed Neal for the article but, didn’t quote or even mentioned his name, is as disturbing as it is incriminating.  It was also why Neal had to respond as he did.

Newton expressed the following in an email: Had I been asked about Citizens, I would have told them that travel is not out of line in the business, as you know. You can easily pay that for a hotel in DC almost any time. Citizens should behave like any other good insurance company and fight to put the best product at the lowest price on the market. That requires also competing for the best executives, which means you have to pay them and put them in the same hotels their peers are in.”

And so the stage was set for Florida’s Cabinet to do what it had to do–take up the politically charged matter and caution Citizens President Barry Gilway against any ill-advised or unnecessary travel.

Regrettably it gave Elmore a small and undeserved out.

While recognizing the bad optics created by a $104 late booking for Citizens Chairman, and acknowledging the criticisms of the Governor and cabinet; Gilway easily proved that the reinsurance deal was in keeping with Scott’s prime directive to lower assessments for “millions” of Floridians.

Face saving follow ups by the Post and Elmore, however, continue to classify the expenditure as “defiance” of a “directive” by Governor Scott.  It wasn’t.  It was in compliance with his directive to lower assessments which Gilway did within both state and federal expense guidelines.

The Post has refrained as well from providing its readers with any of the publicly available data that might provide context in conflict with Elmore’s. Much of which was referenced during the live cabinet broadcast which you can view by fast forwarding to 1:57 here.

Part of the Post’s omissions include a letter from Brad Kading, President of the Association of Bermuda Insurers and Reinsurers (ABIR). Along with the cabinet testimony it indicates the following facts supporting the international travel expenditure:

  • Tax exempt status is often at stake. Reinsurers are constrained from doing business in the U.S. and “Underwriters may not travel to the US to meet with clients…”.
  • Participation in the offshore meetings by senior management is “essential” and often includes the “chairman of the insurance company.”  Citizens management team had to make the trip, in part, because both its CFO and Chairman are new to the enterprise and, again, the meetings “…would not have been possible in the United States.”
  • “Most if not all” of the residual markets similar to Citizens in other states not only purchase reinsurance but, travel annually to Bermuda to meet with reinsurers.
  • According to Bermuda reinsurers generally, “The travel of Citizens senior management to Bermuda was not only consistent with industry practices, it was essential to building an appropriately-sized and efficiently-priced reinsurance program.”
  • The Post used the fact that Citizens had not seen fit to purchase reinsurance until four years ago as rationale against the necessity of international travel. But, that  Citizens did not have reinsurance until four years ago was another reason  to make the trip and to bring the senior management team.
  • For a company as huge as Citizens it would be impossible to purchase reinsurance exclusively within the US at acceptable rates. In 2013 approximately 11% of Citizens reinsurance came from  domestic writers.  Fifty percent came from Bermuda and the remainder from Lloyds and other European players.

Those who are still reading at this point can find a fair and balanced report of the cabinet meeting  in contrast to the Post’s versions; written by Jim Turner with the News Service of Florida and titled: Citizens Insurance Needs to watch cost, Gov. Scott says.


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