Florida Government and Politics Weekly Update

Banking: Financial Meltdown Reshuffles the Deck
Wells Fargo, after its acquisition of Wachovia Corporation, and JPMorgan Chase & Co., after its acquisition of Washington Mutual, Inc., will become two of the top five banks in Florida. Prior to the takeovers, Wachovia was number one in deposits, with a market share of 18.7 percent while Washington Mutual was number five, with a market share of 3.2 percent. On Friday, October 31, 2008, Freedom Bank of Bradenton collapsed. State regulators appointed the Federal Deposit Insurance Corporation (FDIC) as receiver for the failed bank, which will be taken over by Fifth Third Bank. Freedom was the seventeenth bank nationwide to fail this year and the second in Bradenton. In August, Bradenton’s First Priority bank failed and was taken over by SunTrust.

Economy: Florida Among the Top States With Homeowners “Under Water”
According to a study released last week by the real estate research firm First American CoreLogic, Inc., Florida is one of the top four states in terms of homeowners whose mortgages reflect negative equity. Florida, with 29.2 percent of all home mortgages “under water,” is ranked third after Nevada and Michigan, and tied with Arizona. The national average is 18 percent. Florida also is ranked fourth in mortgages that are nearly under water, with 33.9 percent of mortgages within five percent of negative equity.

Politics: GOP Expected to Maintain Legislative Majorities
Going into the election on November 4, 2008, Republicans held a 75-43 majority (with two vacancies) in the Florida House and a 26-14 majority in the Senate. Most observers, including House and Senate Democratic leaders, expect the Republicans to maintain their majorities. This year’s election features two very closely contested Senate races. In Senate District 24 (the seat of Sen. Bill Posey (R-Rockledge), who is running for U.S. Congress), the race between Republican Rep. Thad Altman and Democrat Kendall Moore is apparently too close to call. In the Sarasota area, the race between Republican former Rep. Nancy C. Detert and Democrat Morgan R. Bentley for the District 23 seat formerly held by Sen. Lisa Carlton (R-Osprey) also is extremely close. Both parties expect mixed results in House races, with little net change in the size of the Republican majority.

Business and Insurance: New Workers’ Compensation Rates for 2009
Last week, Insurance Commissioner Kevin M. McCarty approved new workers’ compensation premium rates, which will take effect on January 1, 2009. On average, the new rates reflect an 18.6 percent reduction from the rates in effect in 2008. Since major revisions to Florida’s workers’ compensation law took effect in late 2003, Florida employers have seen a cumulative rate reduction of 60.5 percent. In announcing the 2009 rate decrease, Mr. McCarty noted that the new rates do not take into account the impact of the Florida Supreme Court’s recent Murray decision, which nullified the workers’ compensation attorney fee schedule. New rates that reflect the anticipated impact of the Murray case are expected to be filed later this year, with an effective date no earlier than March 1, 2009.

Insurance: Ratings of Residential Insurers May Be Affected by Credit Market Contractions
Last week, the A.M. Best Company, Inc. announced that its claims-paying ability ratings of several property insurers “have been placed under review with negative implications” because of the impact of credit market contractions on the Cat Fund. The Cat Fund, which is heavily dependent on the ability to issue bonds, provides low-cost reinsurance protection to residential property insurers. In 2007, the Florida Legislature, at the urging of Governor Charlie Crist, dramatically expanded the fund in an effort to reduce the rates charged by insurers. Last month, the Cat Fund determined that it would not be able to issue bonds to meet all of its obligations in the event of a major 2008 hurricane. The Cat Fund projected that, as a result of the credit market contractions, it would be able to cover only $13.3 billion of its total potential obligation of $27.8 billion. Because of the uncertainties regarding the Cat Fund, A.M. Best has begun to review the ratings of Florida property insurers, and announced that the ratings of Allstate Floridian Insurance Company, Argus Fire & Casualty Insurance Company, Omega Insurance Services, Safeway Property Insurance Co., Tower Hill Insurance Group LLC, and United Automobile Insurance Company are under review.

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