Capitol to Courthouse Florida Insurance Week In Review: April 5-9, 2010
Apr 9, 2010
Above: Florida Insurance Commissioner Kevin McCarty released an opinion-style article on Florida’s property insurance market on Friday, April 9. To view the article, click here.
Following is a recap of insurance-related legislative and regulatory events during the week of April 5-9:
Florida Insurance Commissioner Orders Entities to Cease and Desist Sale of Unlicensed Insurance Products
Insurance Commissioner Kevin McCarty announced on April 9, 2010 that the Florida Office of Insurance Regulation (“OIR”) has issued two separate cease and desist orders to companies for selling unauthorized surety insurance. Surety insurance involves a bond that guarantees the performance of a contract – most often related to construction projects.
The OIR has issued an order to Infinity Surety Company, Infinity Surety Agency (collectively referred to as “Infinity” hereinafter) and its president George D. Black, Sr. (“Black”) with home offices in Saginaw, Texas, for selling unauthorized insurance products. A separate order has been issued to Morris C. Sears (“Sears”) doing business as Abba Bonding (“ABBA”) with home offices in Lillian, Alabama, also for selling unauthorized insurance products.
OIR investigators determined Infinity has never been granted a certificate of authority or license to transact insurance as a surety company in Florida. Investigators discovered Infinity offered and sold more than two million dollars worth of bonds to Florida contractors for business transactions with cities, counties and municipalities across the state.
In a separate investigation, OIR investigators discovered ABBA and Sears have never been authorized to sell insurance in the State of Florida. Investigators found that ABBA and Sears sold millions of dollars of unlicensed surety bonds to construction companies in Florida. ABBA has since filed for bankruptcy in Alabama.
Under Florida Law, Infinity, Black, Sears and ABBA have 21 day to respond to the OIR.
The OIR adivised that consumers can determine if an insurer is licensed in Florida by visiting the Company Search tool on the Office’s Web site: www.floir.com.
House Omnibus Bill Temporarily Passed Until Anticipated Reconsideration on April 14
CS/HB 447 by State Representative Bill Proctor (R-St. Augustine) was “temporarily passed” (TP’d) by the House General Government Policy Council (“Council”) on April 9, 2010.
This action was taken because the Council had a very long agenda and, because of CS/HB 447’s complexities and numerous amendments, it would have taken a substantial amount of the Council’s time.
CS/HB 447 has become the “omnibus” insurance vehicle progressing in the Florida House of Representatives. The bill is expected to be considered during the next scheduled Council meeting on April 14, 2010.
Also during the meeting, the Committee adopted proposed committee bill GGPC 10-01 relating to Florida Hurricane Catastrophe Fund (“FHCF”) assessments. This legislation would extend the exemption for medical malpractice insurance from FHCF emergency assessments until May 31, 2013.
Florida Hurricane Catastrophe Fund Contract Year Glitch Bill Presented to Governor Crist
SB 1460, which would return the Florida Hurricane Catastrophe Fund (“FHCF”) Contract Year to June 1 through May 31 beginning June 1, 2010, was presented to Florida Governor Charlie Crist for action on April 9, 2010.
Governor Crist has until April 16, 2010 to sign, veto or allow SB 1460 to become law, effective July 1, 2010.
The FHCF Contract Year, after being legislatively curtailed in 2009, had created unintended negative financial consequences for insurers due to the way in which the cost of reinsurance is amortized on their financial statements.
Without passage of SB 1460, an insurer’s 2010 financial statement will show a larger-than-normal expense associated with the purchase of FHCF reinsurance.
SB 1460 was among the following bills passed by the Florida Legislature and presented to Governor Crist on April 9:
- SB 6 relating to Education Personnel by Senator John Thrasher
- SB 1264 relating to International Banking Corporations by Senator Garrett Richter
- SB 1626 relating to the Ringling Investment Trust Fund/Department of Management Services by Senator Carey Baker
- SB 1628 relating to Federal Grants Trust Fund/Department of Management Services by Senator Baker
- SB 1630 relating to the Audit and Warrant Clearing Trust Fund/Department of Revenue by Senator Baker
- SB 1634 relating to the Transportation Governmental Bond Trust Fund/Department of Transportation by Senator Mike Fasano
- SB 1636 relating to Trust Funds by Senator Fasano
- SB 1638 relating to the Federal Grants Trust Fund/Department of State by Senator Fasano
- SB 1640 relating to the Florida Forever Trust Fund/Department of Community Affairs by Senator Fasano
- SB 1642 relating to the Emergency Response Trust Fund/Military Affairs by Senator Fasano
- SB 1644 relating to Trust Funds/Department of State by Senator Fasano
- SB 2462 relating to the Federal Grants Trust Fund/Department of Community Affairs by Senator Fasano
Florida Senate Banking and Insurance Committee Report: April 7
The Florida Senate Committee on Banking and Insurance (“Committee”) met on April 7, 2010, during which it considered various insurance-related bills. Below is a brief summary of the meeting:
Senate Bill 2108 relating to Insurance by Senator Garrett Richter
During the Committee meeting, five amendments had been adopted to SB 2108, which would relate to property insurance after being amended. However, the bill was temporarily postponed after a Rules challenge by Senate Democratic Leader Al Lawson that was precipitated by the introduction of a Personal Injury Protection (“PIP”)-related amendment to SB 2108 by Senator Mike Fasano. The amendment was later determined to be inappropriate by Senate Rules Chairman Alex Villalobos.
Senator Fasano’s PIP amendment would have afforded premium discounts to auto insurance policyholders for using a preferred provider network to receive PIP benefits. To view a copy of the amendment, click here.
Because the final votes and amendments to SB 2108 were negated by the challenge to Senator Fasano’s amendment during the meeting, the bill has been referred back to the Committee for reconsideration.
If ultimately passed, SB 2108 would change Florida insurance laws relating primarily to residential property as follows:
- A provision requiring the Florida Office of Insurance Regulation (“OIR”) to develop a method of correlating mitigation discounts to the Uniform Home Grading Scale would be repealed;
- Insurers would be allowed to provide written notice of policy changes to policyholders without having to non-renew an entire insurance policy due to a change in policy terms;
- Procedures for insurers and policyholders relating to standards for sinkhole insurance claim investigations and repairs would be revised;
- Procedures pertaining to sinkhole reports by professional engineers or professional geologists would be changed;
- Criteria pertaining to the selection and qualifications of a neutral evaluator for disputed sinkhole insurance claims under the neutral evaluation procedure would be revised;
- Mitigation inspectors would not be able to commit misconduct in performing hurricane mitigation inspections of homes, or provide false or fraudulent information on mitigation inspection forms; and
- Insurers would be allowed to accept hurricane mitigation inspection forms from persons possessing qualifications and experience acceptable to the insurer.
Prior to SB 2108 being temporarily passed, the following amendments were adopted to the proposed committee substitute 561904:
- Amendment 233682, which would allow the Florida Division of Insurance Fraud to send copies of investigative reports to certain entities;
- Amendment 424188, which states that insurers are not liable for attorney fees under 627.428, F.S. unless the judgment is more favorable than a neutral evaluator;
- Amendment 505712, which would reduce the length of time that than an insurer may use the same accountant for preparing annual statements from seven to five years;
- Amendment 642788, which would authorize an insurer to use financial contracts other than reinsurance to provide catastrophic funding;
- Amendment 357214, a technical amendment relating to recording reports with the county clerk of courts; and
- Amendment 316920 relating to automobile insurance and PIP. This amendment was adopted, but ruled “Out of Order” because it was not germane to SB 2108.
Senate Bill 2176 relating to commercial insurance rates by Senator Durrell Peaden Jr.
Amended and passed unanimously by the Committee, CS/SB 2176 exempts specified types of insurance and commercial lines risks from certain requirements of state law relating to the filing and review of rates. At the request of the OIR, an amendment was adopted to SB 2176 that requires a rating organization to notify the OIR of any changes to loss costs within 30 days after the effective date of the change. The bill must be heard by two additional committees of reference before proceeding to the Senate floor for consideration.
Senate Bill 2232 relating to Guaranty Associations by Senator Garrett Richter
CS/SB 2232, which was amended and passed unanimously by the Committee, would change state laws relating to the Florida Insurance Guaranty Association (“FIGA”) and the Florida Workers’ Compensation Insurance Guaranty Association.
The bill implements several policies adopted by the National Association of Insurance Commissioners Property and Casualty Insurance Guaranty Association Model Act. For example, the bill expands an exemption from the applicability of certain provisions of state law to include workers’ compensation claims under employer liability coverage. The bill also revises FIGA’s structure by consolidating its auto liability and auto physical damage accounts into one account.
Further, CS/SB 2232 removes the requirement that an insurer must submit a rate filing to pass through an assessment to the policyholders. Instead, companies would be allowed to apply a recoupment factor to the premium of the policies subject to the FIGA assessment.
CS/SB 2232 has one additional committee of reference.
SB 1658, which was passed unanimously by the Committee, continues the current exemption from public records requirements for trade secrets submitted by private companies to the Florida Commission on Hurricane Loss Projection Methodology, the OIR, or the Florida Insurance Consumer Advocate. It also provides an exemption from public meetings requirements for portions of meetings or rate proceedings in which trade secrets are discussed. SB 1658 has one additional committee of reference.
SB 1662, which was passed unanimously by the Committee, saves from repeal a provision relating to an exemption from public records requirements for certain records of the Florida Self-Insurers Guaranty Association (“FSIGA”). It also provides an exemption from public meetings requirements for certain meetings of FSIGA’s board of directors or board subcommittees.
SB 1662 has two additional committees of reference.
SB 1664, which was passed unanimously by the Committee, continues the current exemption from public records requirements for reports of hurricane loss data and associated exposure data that are specific to a particular insurance company. It also requires Florida International University to annually publish a report summarizing loss and associated exposure data collected from residential property insurers and licensed rating and advisory organizations.
SB 1664 has two additional committees of reference.
Insurance Consumer Advocate Presentation
During the Committee meeting, Florida Insurance Consumer Advocate Sean Shaw gave a presentation on the consumer protection provision that he would like addressed in a property insurance bill. That provision would clarify that the Florida Insurance Consumer Advocate could intervene in a rate filing before the OIR, as well as have full access to hurricane modeling data. Mr. Shaw also said that the OIR should be required respond to the Florida Insurance Consumer Advocate in writing about concerns raised by the agency in rate filings. He added that the OIR should be required to publish these concerns on a Web site.
Citizens Closes on $2.4 Billion High-Risk Account Bond Sale
Citizens Property Insurance Corporation (“Citizens”) announced that it closed on a $2.4 billion dollar bond sale for its High-Risk Account on April 6, 2010. Citizens expects to have approximately $14 billion in readily available cash resources to pay any 2010 hurricane-related catastrophe claims.
Additional details of the bond sale financing are provided in Citizens’ press release, which is reprinted below.
Citizens Property Insurance Corporation Closes $2.4 Billion Bond Sale
Strong Liquidity Program in Place as 2010 Hurricane Season Approaches
April 8, 2010
MIAMI, FL – Citizens Property Insurance Corporation announces that it has closed on a $2.4 billion dollar bond sale, and will enter the 2010 hurricane season in strong shape and on firm financial footing. The bonds, issued on April 6th, were for Citizens’ High Risk Account. For the first time in Citizens’ history, and in a direct reflection of four years without catastrophic storms and strong leadership, no external liquidity was needed for the PLA/CLA (Personal Line Account/Commercial Line Account) and there is no debt outstanding on the PLA/CLA.
James R. Malone, Chairman of the Citizens Board of Governors said, “I very much appreciate the dedication and tireless efforts of the staff at Citizens. This was a very successful raise for which the whole organization can be proud. Due in part to this bond issue, Citizens will have adequate liquidity resources to handle the upcoming storm season and meet its obligation to policyholders. The success of Citizens in closing this bond sale is not only indicative that capital markets are coming back, but also of Citizens’ ability to access capital at extremely favorable rates. This achievement provides important cash flow to Citizens which will ensure timely claims payment in the event of a hurricane.”
Added Sharon Binnun, CFO and Senior Vice President of Citizens, “This financing provides Citizens with sufficient liquidity that can be used for multiple storm seasons at a reasonable cost. The improved market conditions coupled with an outstanding financing team achieved this goal.” Citizens expects to have approximately $14 billion in readily available cash resources to pay hurricane catastrophe claims.
“Citizens was able to place bonds with a broad array of top-tier institutional and retail investors. Market reception was very good, and resulted in financing costs that were over 150 basis points lower than Citizens’ 2009 liquidity financing,” added John Forney of Raymond James, and Citizens’ financial advisor.
The Citizens’ Board of Governors previously approved adding $2.4 billion in a combination of bonds and/or bank credit lines as part of the 2010 liquidity financing program. Citizens successfully placed $2.4 billion of bonds with maturities between one and seven years and interest rates ranging from 1.28% to 4.43%, thereby completing the liquidity program and eliminating the need to pursue pre-event bank facilities. Of this amount, bonds totaling $2.05 billion were issued using tax-exempt fixed rates and $350 million was completed using tax-exempt floating rate instruments.
PIP-Related Amendment Stripped from Property Insurance Bill After Rules Challenge
A Personal Injury Protection-related amendment to SB 2108 that was introduced by Senator Mike Fasano during the April 7, 2010 Senate Committee on Banking and Insurance (“Committee”) was determined to be inappropriate and was stripped from the bill by Senate Rules Chairman Alex Villalobos.
During the Committee meeting, five amendments had been adopted to SB 2108, which would relate to property insurance after being amended. However, the bill was temporarily postponed because of the Rules challenge by Senate Democratic Leader Al Lawson.
Senator Fasano’s amendment would have afforded premium discounts to auto insurance policyholders for using a preferred provider network to receive Personal Injury Protection benefits. To view a copy of the amendment, click here.
SB 2108 has been referred back to the Committee for reconsideration.
Florida Hurricane Catastrophe Fund Coverage Selections and Premium Calculations Updated
Insurer coverage selections and premium calculations for the 2009/2010 Florida Hurricane Catastrophe Fund (“FHCF”) Contract Year have been updated as of March 31, 2010. To view this data, click here.
Coverage selections and premium calculations also have been updated as of March 31, 2010 for the 2006/2007, 2007/2008 and 2008/2009 FHCF Contract Years. Click here to access information on individual Contract Years.
Florida Commission on Hurricane Loss Projection Methodology To Meet On April 15
A review of AIR Worldwide Corporation’s (“AIR”) Atlantic Tropical Cyclone Model V12.0 submission will be the focus of a Florida Commission on Hurricane Loss Projection Methodology teleconference scheduled for April 15, 2010 from 1:00 p.m. to 5:00 p.m. (EST).
Approval of Commissioners’ requests for an AIR on-site visit is part of the agenda, a copy of which can be accessed by clicking here.
Analysis of Pending Managing General Agents Amendments
The 2010 Florida Legislature is currently considering legislation that -if passed- might well eradicate capital from Florida’s insurance marketplace and further harm an already ravaged industry. Specifically, the proposals provide for an expansion of regulatory control over Managing General Agents (“MGAs”) and other insurer affiliates.
On April 1, 2010, Senator Mike Fasano filed Amendment 707330 to SB 2176, a bill relating to commercial insurance rates. The Amendment would expand the regulatory provisions of subsections 638.371(1) and (3), Fla. Stat. -governing “dividends to stockholders”- to include dividend regulation for all affiliated companies of domestic stock insurers. An “affiliated company” is defined in the proposal as any affiliated company within the holding company system that has a contractual relation to any other financial arrangement, whereby a portion of the premium from the insurer is paid to the affiliate.
In addition, Amendment 707330 would expand section 628.801, Fla. Stat. -which governs “insurance holding companies, registration; regulation”- to require domestic and commercially domiciled insurers that are members of a holding company, to annually file financial statements, including financial information for all affiliated companies. The Amendment defines “affiliate” as a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the person specified.
Finally, the Amendment would require insurers to provide the Florida Office of Insurance Regulation (“OIR”) 60 days prior written notice of all proposed contractual transactions between an insurer and the insurer’s holding company -regardless of whether the transaction concerned the entering into, the amending, or the termination of a contract- so long as the contractual transaction related to one the following types of matters: (1) purchases, exchanges, loans, or extensions of credit guarantees, or investments; (2) loans or extensions of credit to any person who is not an affiliate; (3) reinsurance agreements or modifications thereto; (4) all management agreements, service contracts, and cost sharing arrangements; or, (5) any transactions that the OIR determines may adversely affect the interests of the insurer’s policyholders. Under the proposal, the OIR would have 30 days following receipt of notice to approve or disapprove the contractual transaction. Although the Amendment was withdrawn on April 7, 2010, we anticipate the filing of a similar amendment and will continue to monitor the issue accordingly.
On April 6, 2009, Senator Carey Baker filed Amendment 702972 to CS/SB 2044, relating to property insurance. The Amendment 702972 concerns section 624.4085, Fla. Stat., governing “risk-based capital requirements for insurers,” and would add subsection 624.4085(3)(b)(2), requiring residential property insurers -who conduct business with “affiliates”- to include in-depth financial information for all such affiliates. The financials for all affiliates would have to include, as provided in the Amendment, information relating to: (1) total assets; (2) liabilities; (3) surplus or shareholders equity; (4) net income; (5) total amounts receivable from parents, subsidiaries, and affiliates; (6) total amounts payable from parents, subsidiaries, and affiliates; (7) dividends paid to shareholders of common stock; (8) debt service; and, (9) payments for other contractual obligations to support insurance-related activities.
Amendment 702972 would also amend section 626.7452, governing “managing general agents; examination authority,” by removing the exception that a managing general agent may not be examined as if it were an insurer where the MGA solely represents a single domestic insurer.
Moreover, the Amendment would amend section 628.801, Fla. Stat. -“regulating insurance holding companies; registration”- and would prohibit insurers from making any payment to an MGA outside of the contractual terms, unless 30 days notice is given to the OIR in advance of any such payment and the OIR does not otherwise object.
Finally, the Amendment would specifically prohibit insurers from engaging, contracting, or paying any third-party to perform material duties required by an affiliate under the contractual terms unless 30 days notice is given to the OIR in advance of any such engagement, execution, or payment and the OIR does not otherwise object. Notably, however, the insurer may contract with third-parties for purposes of supplementing the MGA during a catastrophic event, so long as notice is provided to the OIR within 30 days following the engagement.
Florida Insurance Commissioner Declares Northern Capital Insurance Company Insolvent; Liquidation Likely
In an April 7, 2010 letter, Florida Insurance Commissioner Kevin McCarty notified Florida Chief Financial Officer Alex Sink that Northern Capital Insurance Company is insolvent. He also indicated that liquidation of the company appears to be a strong possibility. To view the letter and information from Commissioner McCarty, click here.
Amendment Would Afford Auto Premium Discounts for Use of Preferred Provider Network
During the Florida Senate Committee on Banking and Insurance meeting on April 7, 2010, Senate President Pro Tempore Mike Fasano introduced an amendment to Senate Bill 2108 that would allow an insurer to offer a premium discount to automobile insurance consumers who opt to use a preferred provider network to receive Personal Injury Protection benefits.
The amendment was opposed by the Florida Justice Association, subsequent to which a point of order was called during the meeting alleging that the content of the amendment was unrelated to the underlying bill. In its current form, Senate Bill 2108 currently addresses issues related to residential property insurance.
Now, the Office of the Senate President must issue a ruling on whether the amendment is germane to SB 2108. The amendment was otherwise approved for adoption to SB 2108.
Senate Committee Temporarily Passes Residential Property Insurance Bill With Numerous Amendments; SB 2044 To Be Reconsidered April 13
As part of its meeting agenda on April 6, 2010, the Florida Senate Committee (“Committee”) on General Government Appropriations considered Senate Bill 2044 relating to Property Insurance by the Senate Committee on Banking and Insurance and Senator Garrett Richter. However, because of the complex nature of the proposals and related controversial provisions, the bill was temporarily passed and is scheduled to be reconsidered by the Committee during its April 13 meeting.
SB 2044 would make numerous changes to Florida insurance laws primarily relating to residential property.
While some amendments were adopted to SB 2044, others were withdrawn or temporarily passed (but not adopted).
Following is a brief review of the Committee’s actions on the amendments:
- Amendment 213526 by Senator Charlie Dean relating to certifications of rate filings was temporarily passed.
- Amendment 482592 by Senator Dean relating to mitigation discounts and the use of debits was passed.
- Amendment 271686 by Senator Dean that extends the current boundaries of the high-risk area eligible for wind only coverage through December 1, 2012 was passed.
- Amendment 973696 by Senator Dean that is considered to be technical and clarifying to Citizens Property Insurance Corporation’s (“Citizens”) requirement for notice of non-renewal was passed.
- Amendment 302452 by Senator Dean that would provide $283,700 to fund the placement of comparative homeowners’ insurance rates on the Florida Office of Insurance Regulation (“OIR”) Web site was passed.
- Amendment 901794 by Senator Dave Aronberg relating to multi-peril crop insurance passed with minimal discussion.
- Amendment 226802 by Senator Aronberg relating to insurance cancellations was temporarily passed.
- Committee amendment 702972 by Senator Carey Baker relating to managing general agents was temporarily passed. Senator Garrett Richter noted that the OIR is collaborating with insurance industry representatives on the legislation in anticipation of finding common ground.
- Amendment 772662 by Senator Dean that would limit the initial payment of a claim to 50 percent of the replacement cost value for personal property and actual cash value for residential structures was temporarily passed.
- Amendment 302452 by Senator Dean requiring the OIR to notify and assist residential property owners with the termination of their homeowners’ insurance was withdrawn.
- Amendment 784736 by Senator Dean, a substitute for amendment 894358 (also by Senator Dean) that would reform Florida statutes relating to sinkhole claims was temporarily passed. Industry representatives spoke in favor of the amendment. Trial Bar representatives opposed it.
- Amendment 779514 by Senator Dean providing for anti-fraud measures in relation to home inspections and the process of validating windstorm mitigation verification forms was passed.
- Amendment 462250 by Senator Dean relating to the notice of “change in policy terms” was passed.
After being considered by the Committee again on April 13, SB 2044 must proceed through the Senate Committee on Rules.
To view an April 5 legislative analysis of CS/SB 2044, click here. To view complete bill information on CS/SB 2044, which includes all amendments filed to the bill, click here.
Florida Office of Insurance Regulation Issues Order Amending Previous Citizens Takeout Orders
On April 1, 2010, the Florida Office of Insurance Regulation (“OIR”) issued an Order amending certain previously issued Consent Orders with respect to insurers’ obligations when assuming policies from Citizens Property Insurance Corporation (“Citizens”). Specifically, all Consent Orders relating to Citizens takeouts issued by the OIR between March 1, 2007 and March 1, 2010 are amended to delete the language that requires an insurer to renew policies assumed from Citizens for a period of three consecutive years.
Florida Commission on Hurricane Loss Projection Methodology to Review 2009 Models on April 15
Loss model submissions received under the Florida Commission on Hurricane Loss Projection Methodology standards and acceptability process for 2009 will be reviewed during a teleconference scheduled for April 15, 2010 from 1:00 p.m. to 5:00 p.m. (EST).
Those wishing to participate in the call can dial (888) 808-6959 and enter conference code 4765251363.
To view the meeting notice, click here.
Florida Workers’ Compensation Joint Underwriting Association Investment Committee Meeting Report: April 2, 2010
The Investment Committee (“Committee”) of the Florida Workers’ Compensation Joint Underwriting Association (“FWCJUA”), which met Friday, April 2, initiated plans to solicit bids from software companies offering computer programs to help the FWCJUA manage its investment portfolio.
At the meeting, the Committee set the guidelines it will use to evaluate bidders. Among other criteria, the Committee is seeking a firm with at least five years of experience developing software solutions and which offers a product that has been serving insurance clients for at least three years, “so we know the kinks are out of the system,” said Laura Torrence, the Committee’s executive director.
The Committee expects to place advertisements soliciting bids by April 16, and set May 7 as the deadline for submission of bids. Final approval by the FWCJUA Board of Governors is anticipated on June 8, if an acceptable bid is identified.
FWCJUA staff members suggested the price for new software could range as high as $100,000, but expect the bidding process will lower the cost substantially.
Also during the meeting, the Committee chose to retain the five bonds in the FWCJUA’s portfolio that presently carry ratings below “A,” concluding there was no undue risk in doing so. SunTrust Inc., the largest of the outstanding bonds, has a par value of $1.6 million and matures on May 1, 2010.
The sub-“A” rated Anheuser Busch Companies bond, also in the FWCJUA’s portfolio, matured as scheduled on April 1 with a par value of $328,000.
The total value of the FWCJUA’s cash and investment portfolio was stated as $106,311,103, with an average portfolio rating of AA.
Among other agenda items at its next meeting, which is scheduled for May 28, the Committee will consider whether the current state of the investment market and the FWCJUA’s overall portfolio performance warrants any changes in investment policy, investment strategy or cash management decisions. Seeking bonds with shorter maturities and lowering the current targets of 4 percent and 4.5 percent return on bonds with a maturity beyond two years and five years, respectively, are among the ideas the Committee will consider next month.
State Legislators Join Florida Tax Watch, Florida Chamber in Support of Property Insurance Deregulation
The potential for financial disaster should a major hurricane strike Florida was among the issues discussed at a press conference on April 3, 2010, to announce the release of a Florida Council for Economic Advisors at Florida Tax Watch report on the State’s financial exposure from its self-insurance programs specifically relating to Citizens Property Insurance Corporation (“Citizens”) and the Florida Hurricane Catastrophe Fund (“FHCF”).
State Senator Nancy Detert, State Representatives Dave Murzin, Bill Proctor, Marty Coley and former State Representative Don Brown joined Florida Tax Watch and Florida Chamber of Commerce representatives at the Tallahassee event.
The report, which was requested by Florida Chief Financial Officer Alex Sink in 2008, concludes that Florida’s property insurance market concentrates risk, rather than spreads it. At the press conference, it was acknowledged that Florida is one major storm away from a crisis unless the federal government were to intervene at that time. Further, the FHCF has a $7.2 billion shortfall.
Among the recommendations made in the report were:
- Require Citizens to return to its former role as Florida’s insurer of last resort
- Require Citizens and the FHCF to issue estimates of potential assessments
- Encourage the mitigation of residential property
Calling Representative Proctor’s bill, HB 447, a “great start,” Representative Murzin explained that ” . . . the public option to manage hurricane risk isn’t working,” and stressed the need to act to correct property insurance issues during the 2010 Legislative Session.
Representative Proctor said that the reliability of insurance companies should be of primary concern in addressing these issues. Inadequate rates could be biggest problem facing Floridians, he added.
Senator Detert echoed Representative Proctor’s comments, including the suggestion that Citizens should be Florida’s insurer of last resort.
In advocating HB 447 as a solution for Florida’s property insurance issues, Representative Coley said that the State needs to be prepared for the next hurricane season.
According to Mr. Brown, the Tax Watch report concludes that property insurance reform in Florida is necessary. In stating his support for consumer choice in selecting a property insurer, he cited his concerns that consumers may not be able to get their claims paid without provisions for adequate rates.
During the discussion, it was noted that it pre-event storm loss financing is less expensive than that of post-event funding.
In response to media member questions, a representative of Florida Tax Watch said that passage of related legislation as a solution to these problems is anticipated. Hope also was expressed that, if it were passed, Florida Governor Charlie Crist ultimately would sign a property insurance deregulation bill allowing for rate adequacy.
The press conference materials and a copy of the Florida Tax Watch report, entitled “Florida’s Financial Exposure from its ‘Self-Insurance’ Programs: The Citizens Property Insurance Corporation and the Florida Hurricane Catastrophe Fund,” are attached for review.
To access other reports by Florida Tax Watch, go to www.floridataxwatch.org.
Should you have any comments or questions, please contact Colodny Fass.
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