Florida Senate Banking and Insurance Committee Meeting re Property Bill 4/05/2006

On April 5, 2006, the Senate Banking and Insurance Committee met. The Senate Committee took up reform package SB 1980 by Chairman Garcia entitled Property Insurance, which had been a shell-bill. Chairman Garcia released a proposed committee substitute of SB 1980, and there were several amendments to the bill. The proposed committee substitute is attached.

The Committee took up a PCI amendment that clarified that insurers retain the right to determine whether to repair or replace damage, notwithstanding the prohibition or replacement cost hold-backs. The amendment was adopted by the Committee.

The Committee also took up a sinkhole amendment by Senator Fasano that mirrored his separate SB 286, which was also on the Committee’s agenda. SB 286 is attached.

In addition, Senator Fasano offered an amendment on behalf of limited apportionment companies who are reporting no available reinsurance underneath the Florida Hurricane Catastrophe Fund (FHCF) retention. Senator Fasano’s amendment would allow those companies to purchase additional FHCF reinsurance at a 50% rate-online.

Chairman Garcia introduced an amendment titled Temporary Emergency Additional Coverage Option. This complex amendment would essentially lower the FHCF retention to $3 billion for the 2006 contract year.

Senior FHCF Officer Jack Nicholson appeared before the Senate Banking and Insurance Committee and announced an unexpected FHCF deficit of at least $1.55 billion from the 2005 hurricane season and said the FHCF is moving to issue bonds and develop other financing arrangements. This will be the first time the FHCF has been forced into bonding in its history. Mr. Nicholson stated that the FHCF is developing a financing program of more than $4 billion to cover the 2005 deficit and to generate funds for the 2006 hurricane season beginning June 1, 2006. He then used these facts as the basis for his opposition of the two FHCF amendments that would allow insurers to obtain lower layers of FHCF coverage for 2006.

The Committee held lengthy discussions on all the agenda items, but several Senators expressed strong concern that the Committee was unable to fully deliberate due to the time constraints. The Committee took an informal break, and upon reconvening, Chairman Garcia announced that Senate President Tom Lee had provided another committee meeting on Friday, March 7, 2006, from 9:00 a.m to 4:00 p.m., in order to finish the debate and take a vote.

The Committee did pass SJR 98 by Senator Alexander titled Hurricane Loss Mitigation Programs, which is a joint resolution for a constitutional amendment to limit the legislature’s ability to appropriate money from the FHCF.

The Committee also passed SB 1012 by Senator Geller titled Insurance Risk Apportionment, which provides for distribution of general revenue monies to Citizens Property Insurance Company, FHCF and mitigation programs, if appropriately triggered.

In addition, the Committee passed SJR 2132 by Senator Klein, a constitutional amendment to create the elected position of Insurance Commissioner and prohibit campaign contributions to that office by insurance companies or their employees.

We will provide an update on the Senate Banking and Insurance Committee meeting scheduled for Friday, April 7, 2006.

Should you have any questions or concerns, please do not hesitate to contact this office.