Bill to reduce Citizen’s Property Insurance customer numbers moves in House

A bill that would allow out-of-state property insurers to offer policies to customers of state-backed Citizens Property Insurance Corp. moved through the House Insurance and Banking Committee Wednesday.

Under HB 245, surplus lines carriers could sell policies in the state aimed at taking Citizens customers, but would be required to have $50 million in surplus, a rating of A- or better from rating company A.M. Best and two reinsurance policies that would cover two catastrophic storms in a single year.

Bill sponsor Rep. Jim Boyd, R-Bradenton, said he wants to bring more competition into Florida to reduce the risk of Citizens, the largest property insurer in the state.

“This is a win for Citizens because the liability is reduced,” Boyd said. “It offers options for consumers.”

Some Democrats expressed concern with the proposal, however, because the surplus lines companies won’t be overseen closely by the Office of Insurance Regulation, like other companies admitted to the state.

The out-of-state carriers won’t be backed up by the Florida Insurance Guaranty Association, which pays out claims of insurance companies that go bankrupt after a storm, but under HB 245 they must clearly tell potential customers of that difference. Rep. Richard Steinberg, D-Miami Beach, voted for the bill Wednesday, but wants to see it amended to more clearly state the different rules the surplus lines carriers play by.

“It’s important to make sure they have some info to let them know that FIGA wasn’t going to be there,” Steinberg said. “You specifically require the FIGA but you don’t specifically require the relationship.”

During a Cabinet meeting Tuesday, Gov. Rick Scott called for Citizens board members to implement policies to help reduce the 1.46 million policies they have in force, but he also wants lawmakers to make changes to the law to make Citizens less desirable to homeowners. Boyd sees his bill as part of that effort.

“It’s one piece of the puzzle,” he said.

The incoming insurance companies would likely offer rates that exceed Citizens’, but they would have to be close enough to entice Citizens’ customers to leave, since customers would have the right of refusal. Boyd estimated surplus lines carriers would likely offer rates up to 45 percent higher than the rates approved for Citizens.

“They I think as business folks recognize that they would have to have competitive rates in order to compete in the market,” Boyd said.

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