Surplus lines bill to shrink Citizens Property Insurance moving swiftly through Legislature
Jan 12, 2012
The following article was published in The Florida Current on January 12, 2012:
Surplus Lines to Shrink Citizens Moving Swifly Through the Legislature
By Gray Rohrer
A bill making it easier for out-of-state surplus lines property insurance companies to take over policies of Citizens Property Insurance Corp. passed through two committees Thursday – one in the House, one in the Senate – and is now headed to the floor in both chambers, despite objections from some lawmakers that it does not include enough protections for consumers.
Rep. Jim Boyd, R-Bradenton, sponsor of the House version (HB 245), said there were enough protections in the bill, such as requiring surplus lines companies to have a minimum surplus of $50 million, a rating of A- or better from the A.M. Best rating agency and allowing Citizens customers to opt out of the new policy.
“This is far more than what the companies who are already here are required to do,” Boyd said of the requirements. “And we did it that way because surplus lines is an entirely different animal.”
But some Democratic members of the House Economic Affairs Committee complained that surplus lines carriers would not be monitored by the Office of Insurance Regulation, even though it is required to review their applications, nor would their rates be subject to OIR approval. Also, if a surplus lines company offered a rate within 15 percent of Citizens’ rate, a customer would be automatically adopted into that company’s policy, even though they could choose to leave at a later date. The out-of-state companies would also not be required to write sinkhole coverage as part of the policy, nor would they be subject to prompt payment of claims rules as insurance companies already admitted to the state are.
“No prompt payment schedule, no sinkhole coverage. What is to stop these surplus lines companies from jacking up the rates? Nothing at all,” said Rep. Evan Jenne, D-Dania Beach.
Sen. Garrett Richter, R-Naples, sponsor of the Senate version (SB 578), amended the bill to re-insert a provision to alert customers that the surplus lines carriers would not be backed by the Florida Insurance Guaranty Association, which backs up claims in case an insurer goes bankrupt after a catastrophic storm. He said Sen. Mike Fasano, R-New Port Richey, took it out of the Senate version in an amendment in a previous committee in an effort to kill the bill. He stressed that his main intent is to reduce the size of Citizens, which at 1.47 million policies is the largest property insurer in the state.
“What we are doing is expanding the supply of people that are taking policies out,” Richter told the Senate Budget Subcommittee on General Government Appropriations.
The Senate version, which can now head to the floor, was initially scheduled to go to the full Senate Budget Committee, but was later referred to the appropriations subcommittee instead. Fasano, who sits on the Budget Committee but not the appropriations subcommittee, said the rescheduling was done to avoid him.
“There’s no question that they didn’t want to have the battle in the Budget Committee,” Fasano said. “But we’ll still be ready to offer amendments to the bill [when it gets to the floor] to make it more consumer friendly.”
The House version of the bill was similarly referred to two committees and will now head to the House floor.
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