Fla. Senate Looks for Ways to Solve Property Insurance Problems

With thousands of Floridians reeling from huge property insurance premium spikes as yet another hurricane season approaches, a Senate panel began discussion Wednesday of ways to fix what many say is a broken hurricane insurance market.

But with a period of increased hurricane activity expected and company after company, including yet another large insurer this week, saying they can’t afford to continue to write homeowners policies in the state, whatever lawmakers do this year isn’t likely to result in lower rates.

“We cannot expect or promise that premiums are going to be lowered,” Sen. Rudy Garcia, R-Hialeah, the chairman of the Senate Banking and Insurance Committee said.

A sign of the difficulty lawmakers face: the bill stalled Wednesday when no consensus emerged during lengthy debate of amendments dealing with how to lure insurance companies into the state. That forced the Senate to schedule another meeting of the panel Friday to finish debate and take a vote. The issue is one of the top priorities in both the House and Senate this year.

While unable to promise help on premiums, the Senate is instead aiming at easing the burden on homeowners who have to bail out Citizens Property Insurance Corp., the state-created company that sells coverage to people who can’t get it from private insurers.

When Citizens comes up short of what it needs to pay claims, as it has the last two hurricane-heavy years, all Florida homeowners, no matter who their insurer, are hit with an assessment to make up the difference.

The bill (SB 1980) is intended to limit Citizens shortfalls by making homes with more than $1 million in replacement cost ineligible for future coverage.

It also would try to minimize shortfalls by requiring Citizens to add a 25 percent surcharge on policies for non-homestead properties, such as second homes that aren’t lived in full time. If Citizens were to incur a deficit in the future, out-of-state owners of non-homestead property could be hit with another 25 percent surcharge under the bill.
Citizens has a $1.7 billion deficit and all Florida homeowners are paying an assessment because of it.

That assessment was 6.8 percent for 2004 losses. Another surcharge of at least 11 percent is expected later this year to cover 2005 losses.

Also, Gov. Jeb Bush and his Cabinet on Tuesday agreed to a 2.4 percent assessment to make up for a $200 million deficit in the Florida Hurricane Catastrophe Fund, a safety net for insurance companies. The companies can pass on the assessment to customers.

Another means of easing the burden of Citizens’ shortfalls on other Floridians would be to use tax dollars to help offset the deficit. That idea got a boost this week when Gov. Bush endorsed it. He had said before that the idea should be looked at, but this week said he was in favor.

House Speaker Allan Bense, R-Panama City, said he thought the House would also move to use tax dollars to help ease the burden of the assessments this year.

Garcia said that wasn’t yet part of the Senate plan because he is waiting to see new economic estimates due later this month on how much in extra incoming tax revenue might be available.

But the panel passed another bill (SB 1012) that would make that idea part of the answer after future storms. The measure would require after future hurricanes an estimate of how much extra money comes in because of more sales of repair and rebuilding items. That extra money would then go in part to bailing out Citizens, part to a fund for hardening homes against hurricanes and part to the state’s backup fund for insurance companies, the Hurricane Catastrophe Fund, which also has a deficit. The measure, sponsored by Sen. Steve Geller, D-Hallandale Beach, was approved unanimously.
Citizens has about 815,000 policies, making it the second-largest insurer in the state.

This week Atlantic Preferred Insurance Co. announced it wouldn’t renew policies, leaving 140,000 additional Florida homeowners likely headed into Citizens for coverage.

Also Wednesday, the Banking and Insurance Committee heard from Catastrophe Fund officials that its deficit is expected to grow well over $1 billion and that the fund is considering going to the bond market to make up some of that.

The Senate’s insurance plan also aims to help shore up the catastrophe fund by requiring premiums paid by insurers for coverage from the backup fund be increased by 25 percent to provide for a rapid cash buildup in the fund, which would offset some of the deficit.

Topics Florida Catastrophe Carriers Property Hurricane Homeowners Politics