Regulators, business lobby, insurers to make property insurance pitch to Florida Senate panel

Jan 11, 2013

The following article was published in The Florida Current on January 11, 2013:

Regulators, business lobby, insurers to make property insurance pitch to Senate panel

By Gray Rohrer

Business groups, insurance regulators and property insurance companies will make their case on Wednesday for changing Florida’s property insurance market before the Senate Banking and Insurance Committee.

The recommendations will likely reflect the different agendas of the three groups, but all will have a common theme: reducing the role of state-run Citizens Property Insurance Corp. and enticing more companies to insure homes in Florida.

Sen. David Simmons, R-Maitland, asked for regulators and the insurance industry last month to come back with ideas on how to reduce the size of Citizens, which has 1.3 million policies, making it the largest property insurer in the state.

Insurance Commissioner Kevin McCarty didn’t give specifics but said his presentation will focus on “maximizing the private market.”

“The theme is what (Simmons) has talked about, which is maximizing the free market system and what we can do to, you know, revitalize the free market system to minimize the impact of Citizens assessments and look at just the marketplace as a whole. But the emphasis is on free market solutions,” McCarty said.

Don Brown, a former state representative who chaired the House insurance committee and now lobbies on behalf of Associated Industries of Florida on insurance issues, will push for a reduction in the Florida Hurricane Catastrophe Fund, the state’s reinsurance arm. Similar legislation to shrink the Cat Fund from $17 billion to $12 billion by 2017 failed to make it through the Legislature last year.

“AIF is going to propose something similar to the proposal last year,” Brown said.

Cat Fund reforms won’t carry the support of property insurers, who would have to buy more expensive reinsurance in the private market. But Brown is also supportive of provisions sought by the industry, such as an increase in the 10 percent cap on annual rate hikes for Citizens and higher eligibility requirements for customers to be placed in Citizens.

At the heart of efforts to shrink Citizens is a fear of assessments on all policyholders if a cataclysmic hurricane hits the state. Though Citizens has its largest-ever surplus at $6 billion and the ability to pay claims in the event of another Hurricane Andrew — the costliest storm to ever hit Florida, Scott and other lawmakers worry a massive hurricane or series of hurricanes will spur assessments.

“When there’s a $50 billion storm, somebody’s going to pay $50 billion,” Brown said.

Simmons asked presenters to develop solutions without regard to politics, saying it’s the job of legislators to sort out the political implications. But many of the ideas Simmons’ panel will hear Wednesday have been proposed before. A loose coalition of Democrats and Republicans in districts heavily populated with Citizens customers have been able to kill reforms to the Cat Fund, increases in the Citizens rate cap and efforts to allow unregulated companies to take over Citizens policies in recent years.

South Florida lawmakers have consistently railed against the state-run company after a series of public embarassments last year. Citizens President and CEO Barry Gilway, who will make his own presentation before the committee, has defended efforts to use surplus to loan to companies that take over Citizens policies. Citizens board members eventually abandoned that plan, at least for now, under pressure from lawmakers. Citizens is also under investigation from Scott’s inspector general for lavish spending and the firing of the Office of Corporate Integrity.

Rep. Jose Felix Diaz, R-Miami, who filed HB 107 this week to solidify the 10 percent cap on rate hikes, said legislators in other parts of the state must recognize the effect of their proposed changes on Miami and the housing market.

“I do think the Legislature as a whole needs to be cognizant of the fact that every decision they make that makes Citizens less attractive can end up wreaking havoc on this area,” Diaz said.

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