Florida Bills Would Shift Hurricane Risk To State

Mar 5, 2009

National Underwriter–March 4, 2009


Similar bills introduced in both houses of the Florida Legislature would shift coverage for hurricanes from private insurers to the state-a move that two industry organizations find objectionable.

The legislation, HB 1157 and SB 2384, introduced by Senator Mike Fasano, R-New Port Richey; and Reps. Ellyn Setnor Bogdanoff, R-Fort Lauderdale; John Wood, R-Winter Haven; and Priscilla Taylor, D-West Palm Beach, would create a Florida Hurricane Protection Program within the Florida Hurricane Catastrophe Fund. According to the bill, “The purpose of the program is to provide residential hurricane insurance coverage for properties throughout the state.”

Insurers that write residential property insurance in Florida would enter into a contract with the program where the insurer would provide property coverage but the program would issue a policy for hurricane coverage, the bill states. Hurricane coverage is defined by the bill as “coverage for loss or damage caused by the peril of windstorm during a hurricane.”

An independent consultant would recommend a rate plan for program coverage, the bill notes. “In the aggregate, the rates must generate premium revenue equal to or greater than the statewide average annual insured hurricane loss, based on an average of all models currently determined to meet the standards and guidelines of the Florida Commission on Hurricane Loss Projection Methodology, plus expenses,” according to the bill.

Two insurance associations expressed concern with the bill. Julie Pulliam, spokesperson for the American Insurance Association, said the bill is “another attempt to find a government solution to the issue of residential property insurance in Florida.”

The legislature continues to search for a “silver bullet” solution for cheap homeowners insurance, Ms. Pulliam said, but she added the solution should involve the legislature stepping back and trying to unwind some of the “overregulation” that has occurred over the last few years.

William Stander, assistant vice president and regional manager for the Property Casualty Insurers Association of America (PCI), said, “We need solutions that do not place the state’s hurricane risk on the backs-and wallets-of taxpayers. We support limiting the state’s role as a direct insurer and taking the risk burden off of Florida taxpayers and returning it to the global markets.”

Mr. Stander added, “The continuing devolution of the property insurance system in Florida stands out as an example of how a government-run insurance program can exacerbate systemic risk.”

He suggested moving back to “risk-based market pricing” for property insurance in the state.

The National Association of Mutual Insurance Companies (NAMIC), meanwhile, has not taken a position for or against the bill. Liz Reynolds, Southeast state affairs manager for NAMIC, called the bill comprehensive and added, “With so many moving parts, all stakeholders need to consider carefully how changes would be implemented and how policyholders and the marketplace would be affected. As usual, the devil’s in the details, and that takes time to sort out.”