Fla. Panel Moves To Limit Homeowner CAT Exposure
Mar 26, 2008
National Underwriter–Mar. 35, 2008
BY MATT BRADY
NU Online News Service
Legislation aimed at reducing Florida homeowners’ exposure to increased assessments to support the state’s Hurricane Catastrophe Fund in the event of a major storm won unanimous approval in the Senate Banking and Insurance Committee today.
The legislation, known as Senate Bill 2156 and introduced by the committee, would reduce the Temporary Increase in Coverage Limit added to the Florida Hurricane Catastrophe Fund by the state legislature last year.
The coverage limit increase was designed to enable insurers to purchase additional coverage, paid as a reimbursement for losses, beyond their mandatory Catastrophe Fund coverage.
SB 2156 would reduce the amount of optional additional coverage available from $12 billion to $9 billion, and would also limit insurers to a reimbursement rate of 70 percent of losses rather than letting them opt for rates of 45 percent, 75 percent or 90 percent, according to a summary of the bill prepared by senate committee staff.
A companion bill has been introduced in the Florida House and is awaiting action by the Jobs and Entrepreneurship Council which encompasses the House Insurance Committee.
Florida ’s Chief Financial Officer, Alex Sink, supports the measure, and thanked chairman, Sen. Bill Posey, R-Rockledge, and the committee for their work. “With their support, we are eliminating the risk of $5.5 billion in hurricane assessments if we have a bad storm this year,” she said.
Edward Domansky, a spokesman for the state Office of Insurance Regulation, said the OIR would “continue to help the CFO” address hurricane catastrophe issues, but would “defer to the legislature” as to how and what solutions are enacted.
The summary of the bill noted that the Florida Department of Financial Services has estimated that reducing the temporary increase in coverage could save state taxpayers as much as $217 million in annual assessments.
However, the summary also noted that residential property rates could rise in the short term, “because insurers will be required to pay higher premiums for replacement coverage from private reinsurers.”
That opportunity for reinsurers was also seen by William Wilt, an analyst at Morgan Stanley who gauged the potential impact of the bill on Renaissance Re Holdings, Ltd. In a note to investors, Mr. Wilt said that the in Morgan Stanley’s view Renaissance Re is the “primary beneficiary” of its becoming law.
“We would buy the stock today,” he said.
Mr. Wilt noted that bill has significant support and appears heading towards being signed by Gov. Charlie Crist. “Editorials run throughout the state of Florida in recent weeks have spoken out if favor of this legislation,” he said. “The public seems to increasingly understand the financial risks being borne by essentially self-insuring the state’s catastrophe risks.”
The committee also approved legislation proposed by Sen. Jeff Atwater, R-Palm Beach, giving increased authority to the state insurance commissioner.
"The proposed legislation contains numerous consumer protections that would safeguard Floridians from unwarranted and unsupported property insurance rate increases,” said Commissioner Kevin McCarty.
"It also would give my office greater ability to regulate insurance companies by way of increased enforcement authority and more control over the complete rate-filing and review process."