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



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


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