Free Market James Madison Institute Makes Florida Property Insurance Market Reform Recommendations
Jan 26, 2015
Opening Citizens Property Insurance Corporation (“Citizens”) to takeouts by excess and surplus lines carriers was among a lengthy list of reforms proposed in a 20-page document on Florida’s property insurance market published by the James Madison Institute today, January 26, 2015.
To view the document, click here.
Authored by R.J. Lehmann, a longtime journalist known for his espousal of free market principles, the report also makes the following recommendations:
Citizens Reduction and Reform
- Continue incremental reduction of Citizens coverage limits for two additional years, to $500,000
- Remove non-primary residences from Citizens, with exceptions
- Implement incremental Citizens eligibility reform with a “circuit-breaker”
- Allow excess and surplus lines carriers to take out policies from Citizens, with conditions
- Establish stricter notification requirements for future depopulation initiatives
Florida Hurricane Catastrophe Fund (“FHCF”) Reduction and Reform
- Gradually decrease the FHCF’s statutory capacity from $17 billion to $14 billion, with an emergency “override”
- Gradually increase the FHCF’s statutory deductible from $7 billion to $8 billion
- Surplus protection mechanism to cover second-year claims
- Explicitly authorize (but not require) FHCF managers to negotiate the purchase of private risk transfer
- Allow flexibility to primary insurers in years when the FHCF is projected to experience a shortfall
- Include the goal of taxpayer protection in the FHCF’s mission statement
- Require reports from financial advisors to explicitly discuss second event and second season claims-paying capacity
- Redefine “funds” or “cash balance” as “any money that does not have to be repaid”
- Include taxpayer protection efforts in bi-annual reports
Claims-Paying Estimate and Conflict-of-Interest Reform
- Require an annual report on the combined post-storm bonding capacity of Citizens, the FHCF and the Florida Insurance Guaranty Association, assuming all three may attempt to issue bonds simultaneously after a significant hurricane event or season
- Enact conflict-of-interest rules to preclude financial advisers from deriving financial gain from bond issuances
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