A bill that would allow surplus lines policies to directly assume policies from Florida’s state-run property insurer is all but dead after lawmakers tacked on an amendment that would require policyholders to sign-up for the program.
The Florida Senate by a 21 to 18 margin approved the amendment that was added to HB 245, sponsored by Senator Garrett Richter (R-Naples).
Approved by the Florida House of Representatives, the bill would allow surplus lines carriers for the first time to participate in the depopulation programs of Citizens Property Insurance Corp.
Richter said he believed the amendment would kill the intent of the bill since instead of assume a group of policies, surplus lines carriers would have wait and see if any policyholders wanted to purchase the coverage.
“With this amendment I don’t think a surplus lines company is going to do it,” Richter said. “They will put their capital elsewhere.”
The measure is being sought by GeoVera Specialty Insurance Co., which has operated in the state since 1994 and currently has some 30,000 policyholders around the state. The Fairfield, Calif.-based company primarily offers residential homeowners polices and earthquake coverage in the southeast and Midwest.
While the bill has broad support in the House, many senators have been wary of it since surplus lines carriers are not regulated by the state. That has caused some senators to complain the bill doesn’t have adequate consumer protections.
For example, surplus lines policies get to set their own rates and their policies are not covered by the Florida Insurance Guaranty Association, which pays homeowners’ claims in the event an insurer goes bankrupt.
Richter pointed out that the bill does require surplus lines to take significant steps to show they are viable insurers.
Under the bill, the insurers must maintain a minimum surplus of $50 million and maintain an A minus or better financial rating from A.M. Best. The insurer must also maintain enough capital reserves, surplus, and reinsurance to cover at least two projected 100-year probable maximum hurricane losses per hurricane season.