Today could be the day both the Florida House and Senate take up legislation to improve the state’s property insurance market, including proposals allowing state-backed insurance writer Citizens Property Insurance to raise its rates.
The House and Senate bills would effectively lift a freeze on Citizens’ rates at December, 2006 levels imposed by the Legislature in 2007 and provide a so-called “glide path” for rate increases on Citizens’ policies.
While they are similar, the bills do differ slightly. The Senate version would allow Citizens to raise rates no more than 10 percent per year for any single policyholder over a multi-year period. Under the House bill, Citizens’ rate increases are limited to 10 percent on average statewide or 20 percent per individual policy.
Under both measures, the rate increases would cease once actuarially sound rates are achieved.
In addition, the bills would begin a process of shoring up the state’s property reinsurer, Florida Hurricane Catastrophe Fund, which experts say would have trouble making good on its obligations if a major storm hit. Of the Florida CAT’s fund’s almost $29 billion in potential exposure, it has the resources to cover about $7.6 billion should it become necessary, with the difference supposedly covered by the sale of bonds. The CAT fund’s managers believe it could raise perhaps $8 billion in bonds; however, their success is dependent upon the credit markets. If credit remains tight, the FHCF might not be able to raise that much.
To help ease the situation, the bills would reduce the coverage now made available to private insurers by the FHCF. The fund provides up to $16.3 billion in mandatory coverage; in 2007, lawmakers authorized it to offer a temporary additional layer of $12 billion. That temporary additional layer would be phased out under the bills.
Both bills allow that 10 percent of Citizen’s rate increase revenues must be used to fund mitigation grants for Citizens’ policyholders under the My Safe Florida Home Program.
The current legislative session ends May 1.
Senate bill analysis:
House bill analysis:
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