Florida Senate Insurance Committee Passes Flood Insurance Bill; Discusses Citizens Exposure Reduction

Jan 9, 2014


The Florida Senate Committee on Banking and Insurance (“Committee”) met yesterday, January 8, 2014. 

After Committee Chair David Simmons called the meeting to order, Senator Jeff Brandes presented SB 542, relating to flood insurance. 

The bill would allow private market insurers to offer flood coverage, either as an endorsement or as a separate policy.  Senator Brandes explained that his bill would offer an alternative to the National Flood Insurance Program, thus affording more choices to consumers.  The Committee adopted an amendment to the bill that would provide more consumer protections.

Senator Alan Hays questioned whether or not Citizens Property Insurance Corporation (“Citizens”) would be allowed to offer flood insurance policies, adding that he would like to prohibit Citizens from doing so.  Senator Brandes agreed to strengthen the language in the bill to prohibit Citizens from offering flood insurance. 

The Committee unanimously passed the amended bill as a committee substitute.

Also as part of the agenda, the Committee discussed proposals for reducing Citizens’ size and exposure.  Recommendations included:

  • Expanding Citizens’ new private market Clearinghouse to include commercial residential policies
  • Reducing the policy limits for commercial residential policies from $25 million to $4 million over the course of four years
  • Capping Citizens’ total insured value for commercial residential buildings at $5 million
  • Requiring actuarially sound rates for Citizens’ commercial non-residential policies
  • Prohibiting Citizens from writing new wind-only policies in its Coastal Account (formerly the High-Risk Account)
  • Shifting five percent of the 15 percent surcharge levied on Citizens’ Personal Lines Account to the Coastal Account
  • Removing the Citizens “glide path” for homes with replacement cost values greater than $400,000
  • Increasing the eligibility threshold for a Citizens Clearinghouse renewal offer to 15 percent for homes that have replacement cost values of $300,000 or more

Chairman Simmons recognized Locke Burt, Chairman and President of Security First Insurance, who presented recommendations for reducing Citizens’ exposure.

Mr. Burt noted that, as of November 30, 2013, Citizens’ total exposure was $330,768,013,550, and that 74 percent of Citizens’ policies provided full coverage.  More than half of the exposure comprises policies other than personal residential multi-peril, including commercial lines, commercial residential and personal residential wind-only.

Mr. Burt reviewed the recommendations of the 2009 Citizens Mission Review Task Force, which included repealing the requirement that Citizens offer commercial policies, and studying ways to depopulate commercial residential risks.  To reduce commercial residential exposure, Mr. Burt recommended:

  • Limiting the total insured value for Citizens’ commercial residential risks to $10 million;
  • Allowing Citizens to individually rate residential risks with values over $2.5 million;
  • Removing the exclusions for Florida Hurricane Catastrophe Fund coverage for condominium units rented more than six times a year; and
  • Increasing Florida Insurance Guaranty Fund coverage for condominium claims from $100,000 per unit to $200,000 per unit.

Mr. Burt also reviewed the history of Citizens’ Coastal Account, describing the rates for its wind-only policies as 35 to 70 percent inadequate. 

Citizens President and CEO Barry Gilway expressed concern that no private market exists for wind-only policies, reminding the Committee that one is available for multi-peril policies. 

Mr. Gilway outlined proposals that could reduce Citizens’ exposure, including reducing Citizens’ coverage cap for commercial residential coverage, expanding Citizens’ Clearinghouse to include commercial residential policies, allowing individual rating for certain risks and increasing Citizens’ glide path to 10 percent.

Chairman Simmons expressed his own desire to introduce legislation during the 2014 Session to address Citizens’ size and exposure.

With no further business, the meeting was adjourned.

While a final packet for this meeting has not been published, agenda, audio and video hyperlinks are available by clicking here.


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