re: Insurance rates lead to major softening of Florida Real Estate market

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State Farm isn’t really an insurance company, they’re a marketing firm that resells policies to underwriters who hold most of the risk in return for a percentage of the policy.

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You are wrong in what you said but your concept is right. There are about half a dozen or more different State Farm’s and there is definitely a State Farm Florida. Look it up in AM Best ratings. There is a State Farm Florida, State Farm Texas, etc. Hell, there is even an SF Lloyds. Saying State Farm sells all the risk to another company is reinsurance. It is a common practice for all insurance companies. To say SF just sells all their exposure is wrong as they keep a large portion of it and even use their own reinsurance companies. Florida also requires where if an insurance company goes bankrupt or doesn’t have the funds to pay a claim, the claims the other company committed to paying get paid by all the other insurers left in the state. By selling off some of the risk, they also sell off that exposures.

What you are talking about is called reinsurance. The company who sells the policy then sells some of the risk to the reinsurers. This is common for big risks. For example, when the world trade centers were insured, that risk had about a dozen or more carriers with coverage on the building. The owners of the building didn’t go to 25 different carriers. One group took on the risk and sold parts of that risk to other company’s for a portion of the premium.

It is incredibly common in the insurance industry. Florida is just unsustainable due to the massive amounts of regular losses.