Bill for surplus lines’ takeout of Citizens Property Insurance policies ready for House vote
Feb 2, 2012
The following article was published in The Florida Current on February 2, 2012:
Bill for surplus lines takeout of Citizens policies ready for House vote
By Gray Rohrer
Out-of-state, unregulated property insurers known as surplus lines carriers could have an easier time taking over policies from state-backed Citizens Property Insurance Corp. under a bill set for a vote Friday in the House.
Lawmakers discussed HB 245 Thursday in the House, with Democrats bristling over the lack of oversight from the Office of Insurance Regulation, which oversees domestic insurance companies.
Rep. Jim Boyd, R-Bradenton, sponsor of the bill, countered that his legislation includes requirements of surplus lines companies that some domestic companies don’t meet, such as a $50 million surplus provision and a rating of A- or better by the A.M. Best rating agency. He thinks the increased competition from private companies will work to keep premiums down, even though surplus lines companies could dramatically raise their rates after securing a policy.
“Yes, their rates are unregulated by OIR, but they are regulated by the competitive marketplace,” Boyd said.
After clearing initial hurdles, though, surplus lines carriers would not be regulated by OIR and their rates wouldn’t be subject to regulatory approval. Also, Citizens customers would have one month to opt out of the new policy before the out-of-state company would take them over, although Boyd pointed out that customers could go back to Citizens at any time. Customers will be informed of the differences between the policies under HB 245, as well as the fact that the Florida Insurance Guaranty Association, which pays out the claims of insurers that go bankrupt, would not back up the surplus lines policies.
“There is nothing in this bill that requires the homeowner to be informed that the surplus lines carrier is not going to be regulated by OIR,” said Rep. Martin Kiar, D-Davie. “Most people know them as the protectorate of arbitrary rate increases.”
Boyd and other lawmakers want to reduce the number of policies in Citizens, which currently has 1.47 million policies and is the largest property insurer in the state. They say Citizens offers premiums at actuarially unsound rates and relies on costly assessments on even the policies of non-Citizens customers after a hurricane hits.
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