Florida House Insurance and Banking Subcommittee Reviews Citizens Property Insurance, Florida Hurricane Catastrophe Fund Bills
Jan 18, 2012
The House Insurance & Banking Subcommittee (“Subcommittee”) met Tuesday, January 17, 2012. The first item on the agenda was House Bill 941, relating to commercial lines insurance policies, filed by Representative Doug Holder. After limited questions from the Subcommittee members and no debate or public comments, the bill passed unanimously.
The Subcommittee also work shopped two bills: House Bill 1127, relating to Citizens Property Insurance Corporation (“Citizens”), filed by Representative Ben Albritton and House Bill 833 relating to the Florida Hurricane Catastrophe Fund (“FHCF”), filed by Representative Bill Hager.
Representative Albritton presented House Bill 1127. He explained the goal of the bill is to bring more private insurers to Florida and to strengthen the insurance market. The bill alters the assessment levels of Citizens. The Subcommittee members asked questions concerning which policies are currently in each assessment level and which ones would remain in each layer.
Sharon Binnun, Chief Financial Officer of Citizens, testified before the Subcommittee. She explained that Citizens is open to reducing the size of Citizens and reducing the assessments. Citizens has done its own internal analysis of the bill and has concluded that the potential benefits to the insurance market outweigh any risks of a negative impact by the bill. The bill also would allow Citizens to levy the assessments quicker in the case of a catastrophic event to generate cash flow due to their potential ability to alter the percentages as the losses are realized.
Monte Stevens from the Office of Insurance Regulation also testified. He explained how new insurance companies are concerned about entering Florida’s market due to the potential for assessments by Citizens. Insurance companies would need to have enough capital upfront to cover the assessments, which creates barriers for new companies.
Ms. Binnun also explained the actual process of what happens when assessments are levied by Citizens. Subcommittee Chairman Bryan Nelson inquired if the problems would be solved if Citizens was required to buy more reinsurance. Ms. Binnun explained that Citizens would have no problem buying more reinsurance; however, they are unable to pass on the additional charges for reinsurance to policyholders with rate increases due to the restrictions in the Florida Statutes.
Other public comments came from members of the insurance industry and a public policy institute showing support for the legislation.
Representative Bill Hager presented House Bill 833 to the Subcommittee. Representative Hager explained the current conditions of the FHCF and illustrated how the FHCF does not have the ability to pay all potential claims. The size of the FHCF needs to be reduced, and the unfunded portion needs to be moved to the private market. Representative Hager outlined the key features of the bill and how the changes would ultimately reduce the size and exposure of the FHCF.
Dr. Jack Nicholson, Chief Operating Officer of the FHCF, testified in support of House Bill 833. He gave a more detailed analysis of how the bill would be moving reinsurance to the private market.
Representative John Wood questioned Dr. Nicholson on his recommendation to fix the FHCF by placing a larger burden on Citizens. Representative Wood suggested that shrinking the FHCF would increase premiums in the private market and would drive business into Citizens, making the situation in the private market worse.
Dr. Nicholson replied by agreeing and stating that there needs to be another bill addressing rate increases for Citizens.
Florida Insurance Consumer Advocate Robin Westcott raised questions concerning the bill. She agreed with the concept that the FHCF needs to be reduced, and stated her support for creating a competitive market. The current bonding shortfalls and rate increases are legitimate concerns; however, she warned the Subcommittee that if the FHCF is not altered in the correct way, it could have a negative impact on the private market.
Additional members of the public spoke in opposition to the bill raising similar concerns about how the bill could ultimately harm the small private insurance companies and deter additional companies from entering into the market.
There were no votes or actions taken on either of the workshopped bills.
To view the meeting packet, click here.
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