Florida Senate Committee on Banking and Insurance Reviews Proposed Citizens Property Insurance Legislation

Feb 21, 2013


Today, February 21, 2013, the Florida Senate Committee on Banking and Insurance (“Committee”) reviewed a proposed bill relating to Citizens Property Insurance Corporation (“Citizens”). 

To view a copy of the meeting materials package, click here.  It includes a copy of the bill’s draft language, as well as a section-by-section summary. 

Committee Chairman David Simmons provided opening comments.  He noted the bill is an “a la carte” menu of Citizens-related items. He also related that he had met with Senate President Don Gaetz and Senate President Pro Tempore Garrett Richter to discuss the proposal. 

Chairman Simmons explained that this bill is a work in progress and subject to change based on legislators’ input.  The starting point of the bill recognizes that the current Citizens statutory framework is broken, he said.  Specifically, he pointed out that the fact there are 192,000 non-homestead properties insured by Citizens is unacceptable.

Further, he suggested Citizens should consider purchasing reinsurance in the private market.  According to an analysis, it is determined that there are 217,000 Citizens policies that are more costly than what the private market could offer.  Senator Simmons also noted it is an issue that half of Citizens’ policies come from captive agents.  He also noted the problem that Citizens’ wind-only policies are seriously below actuarially sound rates.

Below is a brief section-by-section summary of the proposed Citizens legislation and the consensus of the Committee members as whether to leave in (designated by “IN”) or take out the section (designated by “OUT”).

Section 1

Reduce the Florida Hurricane Catastrophe Fund (“FHCF”) – OUT. 

This section generated significant discussion. Senator Simmons noted this provision was included with the expectation it would be taken out.  Senator Alan Hays advocated in support of the provision, noting the state is playing a “shell game” by offering illusory coverage.  However, the consensus of the Committee members was to leave it out because of its rate impact.    

Section 2

Establish a Florida Catastrophe Risk Capital Access Facility – IN.

Section 3

Exempt Citizens from certain restrictions to facilitate the operation of the proposed private market clearinghouse – IN.

Section 4

Require the Florida Office of Insurance Regulation (“OIR”) to establish a property insurance inflation factor – IN.

This section was proposed by Florida Insurance Commissioner Kevin McCarty.  He estimated this factor would be 7 percent annually.

Another proposal in this section allows insurers to recoup reinsurance costs to cover what the FHCF cannot pay in its rate filings – IN.

Senator Hays would like to require insurers to purchase this reinsurance and be able to recover the cost.

Section 5

Requires the Florida Commission on Hurricane Loss Projection Methodology to review and approve wind mitigation discounts and credits – IN

Section 6

Require insurers to use the same model for calculating mitigation credits that is used to estimate losses – IN. 

Commissioner McCarty noted this provision is necessary to align risk with rates.

Section 7

Provide flexibility to the OIR for rate hearings that are currently required for all filings above 15 percent – IN.

Section 8

Allow insurers to use consent-to-rate for 10 percent of commercial policies and 5 percent for personal policies if there is a reasonable degree of competition. There is no limit to consent-to-rate where no reasonable competition exists – IN.

Section 9

Redefine Citizens’ mission to include the use of a clearinghouse – IN.

Reduce Citizens’ policy limit to $600,000 (this is estimated to impact 23,000 policies) – IN.  

Senator Gwen Margolis suggested a phase-in reduction at $800,000 for Year One, $600,000 for Year Two and $400,000 for Year Three.  Chairman Simmons suggested this could be an option.

No new Citizens policies would be written on properties that are seaward of the Coastal Construction Control Line unless the structure is built to Code Plus (i.e.: Monroe County building codes) – IN.

Section 10

Prohibit Citizens from writing wind-only policies – OUT

Section 11

Allow Citizens to enter into a risk-sharing agreement with private insurers – IN. 

This provision is also in Senate Bill 724 by Senator Jeff Brandes.

Clarify that a private insurer’s offer within 15 percent of Citizens’ makes that policy ineligible for Citizens coverage – IN.

Require agents to certify they are seeking private market placement – IN.

Prohibit agent commissions on ineligible policies – IN.

Require Citizens to disclose potential assessments – IN.

Section 12

Require the Florida Auditor General to conduct an annual, rather than a once-every-three-year audit of Citizens.  Also, hire an independent auditing firm to conduct a management audit on a bi-annual basis – IN.   

Section 13

Require Citizens rates to be actuarial sound for new policies and non-competitive with the private market.  A non-competitive rate is defined as the highest rate among the top 20 writers – IN.

Require certain risks to be placed at the top 20 rate – IN. 

Apply the Glide Path by territory rather than individual policy – IN.

Permit Citizens to buy 3 percent private market reinsurance and reduce assessments by 3 percent – IN.

Provide rate relief for Citizens policyholders deemed in financial need – IN.

Section 14

Allow Citizens to establish a surplus note program for mutual company to reduce Citizens’ policies – IN

Section 15

Establishes criteria for the proposed private market clearinghouse – IN.

Section 16

Require assignment of benefits for property insurance to comply with policy conditions – OUT. 

Sections 17, 18

Codifies OIR self certification approval process for forms and filing – IN.

Section 19

Subject Citizens to bad faith actions with sovereign immunity – IN.

Section 20

Effective date of July 1, 2013 unless otherwise provided – IN.


The Committee adjourned following the discussion on the proposed bill. 

Chairman Simmons advised that Commissioner McCarty will be in attendance at the Committee’s next meeting on March 7 to address specific issues, such as the number of out-of-state residents who hold Citizens policies. 

The Committee is expected to make time for public testimony at the March 7 meeting.

To access complete documentation from today’s Committee meeting, including a podcast and video replay, click here.


Should you have any questions or comments, please contact Colodny Fass& Webb.



Click here to follow Colodny Fass& Webb on Twitter (@CFTLAWcom)



To unsubscribe from this newsletter, please send an email to Brooke Ellis at bellis@cftlaw.com.