Florida Senate Committee on Banking and Insurance Meeting Recap: February 6, 2013
Feb 8, 2013
The Florida Senate Committee on Banking and Insurance (“Committee”) met Wednesday, February 6, 2013, and heard testimony on issues relating to property insurance. To view the Committee meeting materials, click here.
Chairman and President of Security First Insurance Company Locke Burt presented the Committee with options he believes have the potential to shrink the size of Citizens Property Insurance Corporation (“Citizens”).
Mr. Burt illustrated two key points. The first is that shrinking Citizens does not require the price paid by its policyholders to increase. In reality, thousands of policyholders could save money by shopping for insurance from the private market.
The second idea discussed by Mr. Burt is enforcement of the current 115 percent rule for Citizens’ eligibility. The end result would be fewer people qualifying for coverage at subsidized rates.
Mr. Burt also discussed five common misconceptions regarding Citizens.
- Citizens provides the majority of homeowners insurance in Florida.
- Citizens is growing because the private sector is not writing new business.
- Citizens’ policies are cheaper than those sold by private companies.
- There will always be 400,000 policies in Citizens’ Coastal Account.
- Florida-based insurance companies will be unable to pay claims in full after a large hurricane.
Mr. Burt also discussed the 20-year-old trend regarding large “name brand” companies leaving Florida. He said that many of the larger national insurance companies want stability in the market.
Florida Insurance Commissioner Kevin McCarty spoke on behalf of the Florida Office of Insurance Regulation expressing support of the idea of the clearinghouse and Florida Insurance Consumer Advocate Robin Westcott’s wind mitigation concept.
Commissioner McCarty also discussed the importance of enforcing what is currently in law, and that Citizens acts in accordance with the 15 percent rate differential eligibility rule.
President and CEO of Capitol Preferred Insurance Company and Southern Fidelity Insurance Group Jim Graganella presented the Committee with a depopulation idea, which he described as not a silver bullet to all Citizens’ problems, but as a step toward depopulation.
Mr. Graganella, who has participated in numerous takeouts with Citizens, said that he believes one of the major issues with depopulation is the reinsurance load associated with the policies. If Citizens is authorized to enter into agreements with private companies that help alleviate the reinsurance cost, depopulation in those areas is more likely. Mr. Graganella believes that Citizens would need to be authorized to enter into agreements with companies that would allow Citizens to co-finance some of the reinsurance cost. At the initial takeout, Citizens would co-finance 75 percent of the reinsurance costs, then over time that percentage would be decreased until it reaches zero. This would allow private companies to gradually bring policies to actuarial sound rates over time. Mr. Graganella reiterated that, in his view, the most imperative aspect is that there is capital out there and it should be in the private market. If there is a way to effectively depopulate Citizens, it will empower the private market to take full advantage of the capital, and enhance the property insurance market in Florida.
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