Future Plans Unclear for Florida Last-Resort Insurer
Apr 26, 2011
The following article was published in Property Casualty 360º on April 26, 2011:
Future Plans Unclear for Florida Last-Resort Insurer
By Chad Hemenway
A Florida bill meant to restore Citizens Property Insurance Corp. as the state’s last-resort insurer has stalled in the Senate Banking Committee.
The bill, SB 1714, looks to increase rates and decrease the value of a home that could be eligible for a policy. Rates in the private market would have to be 25 percent higher than Citizens’ rates to obtain a policy—up from the current eligibility standard of 15 percent.
The measure was not considered in Senate committee as news reports from Florida say Gov. Rick Scott is looking to eventually phase out the state-run insurance program, which has grown into the largest property insurer in the state.
Without specifically commenting on Scott’s alleged intentions, Samuel Miller, executive vice president of the Florida Insurance Council, says any plan to get rid of Citizens “is not in either bill [SB 1714 and its House companion bill] or any draft.”
He adds, “I’m not sure you can do that [get rid of Citizens]. Florida has had a residual market for many years, and I think there will always be a need.”
However, Citizens is currently writing thousands of policies the private market would take if insurers didn’t have to compete with Citizens, Miller says. The state-run company is “much too big” and its ability to pay claims in a timely manner after a large storm is “very questionable,” he adds. Citizens has the power to assess the state’s policyholders if it needs money to pay claims.
Sen. Alan Hays (R-Umatilla), the sponsor of the bill, says Citizens is underfunded by at least $10.5 billion.
In a statement, Scott’s office says the Legislature is “still considering ways to fix this issue, but the governor has always been clear—he wants a vibrant, competitive private insurance market.”
Scott’s office concedes, “With the position we’re in now, Florida taxpayers would be on the hook for a major storm or hurricane. That’s not acceptable.”
William Stander, assistant vice president and regional manager for the Property Casualty Insurers Association of America (PCI), says the trade group has helped lawmakers with understanding issues regarding Citizens. For some reason, he says, “they are having difficulties trying to make a decision.”
During the last election politicians said they were in favor of restoring the private market, but “those goals have met more resistance than we anticipated,” Stander says.
SB 1714 and its House companion bill 1243 would allow Citizens to increase rates up to 20 percent per policyholder and would reduce eligibility from homes valued at up to $1 million to homes valued at $750,000 starting Jan. 1, 2014.
Citizens has steadily ballooned since rates were frozen four years ago. Legislation passed last year allowed for a 10 percent rate increase, but the damage was done. Rates fell to levels far below those considered adequate for the risk. Because rates remained flat, many more homeowners found they met the rate-differential eligibility requirement.
Fidn this article here: http://www.propertycasualty360.com/2011/04/26/future-plans-unclear-for-fla-last-resort-insurer