Florida Senate Budget Committee Report: April 15

On April 15, 2011, the Senate Budget Committee considered several insurance related bills during its meeting; however, no vote was taken on either SB 1330 Relating to Residential Property Insurance, or CS/SB 1714 Relating to Citizens Property Insurance Corporation and both were temporarily postponed.

SB 1252 Related to Persons Designated to Receive Insurer Notification, sponsored by Senator Chris Smith, was favorably passed as amended by Senator Joe Negron’s late-filed Strike-All Amendment (“Strike-All”), without questions or debate.

The Strike-All maintains the original provisions of the bill, which changes the designated recipient of certain insurance policy notices from the “named insured,” including all persons named on a policy, to the “first named insured” as the primary contact for administrative matters on the policy.  However, the Strike-All also makes several additional statutory changes, including but not limited to, requiring the disqualification of an insurance agent’s application due to a felony conviction and permitting workers’ compensation insurers to select paying weekly compensation payments via a prepaid card.

The Strike-All was adopted, there were no questions or debate on the bill as amended, and the bill favorably passed.

SB 1330 Relating to Residential Property Insurance, sponsored by Senator Alan Hays, which is designed to deregulate residential insurance rates, was temporarily postponed after a late-filed Amendment to an Amendment by Senator Bill Montford was favorably adopted.  SB 1330’s companion bill, CS/HB 885, is no longer a rate deregulation bill and instead, provides for an expedited filing process for reinsurance costs. 

The Committee raised several questions on the bill, the first by Senator Sobel asking if the bill involved a rate increase.  Senator Hays confirmed that it permits a 15% rate increase.  There was substantial discussion by Committee members regarding insurers who have recently received an approved rate increase by the Office of Insurance Regulation (“OIR”), such as State Farm Florida’s recent 19% rate increase approval, and whether they would be permitted to self-impose an additional 15% rate increase on new policies, for an overall effective rate increase of 29%.  Senator Hays confirmed that insurers, in theory, could do so and Senator Evelyn Lynn indicated she could not vote for a bill that might result in such dramatically higher costs to consumers.

The Committee then heard Senator Montford’s late-filed Amendment to an Amendment, which reduced the rate increase from 15% to 10%.  The Committee questioned Senator Montford as to whether he understood his amendment’s effects and he confirmed that he did, feeling it was necessary.  A vote was taken and the Amendment to an Amendment was adopted. 

Representatives from State Farm Florida spoke in strong support of the bill.  After more discussion on the appropriateness of permitting a non-regulated rate increase where a company has just received a regulated rate increase, upon motion of Senator Hays, the bill was temporarily postponed.

CS/SB 1568 Relating to Insurer Insolvency, sponsored by Senator Bill Montford, was favorably passed as amended by Amendment 323402, which revises s. 215.5595(11), F.S., governing Insurance Capital Build-Up Incentive Program, to provide:

(11) For a surplus note issued under this section before  January 1, 2011, the insurer may request that the board renegotiate terms of the note as provided in this subsection. The request must be submitted to the board by January 1, 2012. If the insurer agrees to accelerate the payment period of the note by at least 5 years, the board shall agree to exempt the insurer from the premium-to-surplus ratios required under paragraph (2)(d). If the insurer requesting the renegotiation agrees to an acceleration of the payment period of less than 5 years, the board may, after consultation with the Office of Insurance Regulation, agree to an appropriate revision of the premium-to-surplus ratios for the remaining term of the note. However, the revised ratios may not be lower than a minimum writing ratio of net premium to surplus of at least 1 to 1, and alternatively, a minimum writing ratio of gross premium to surplus of at least 3 to 1.

The Amendment also revises s. 624.424, F.S., regarding annual statements to change the prohibition against using the same accountant from 7 consecutive years to 5 consecutive years.  Once the 5 year limitation is reached, the amendment also prohibits the insurer from using that same accountant for another 5 years, rather than 2 years. Finally, the amendment amends s. 624.610, F.S., governing reinsurance, to change the provision from requiring the insurer to hold surplus in excess of $100 million, to requiring the insurer to hold surplus in excess of $250 million before the Commission allows credit.   Amendment 814928 was withdrawn by Senator Montford.  After Senator Montford closed, a vote was taken on the bill as amended, and CS/SB 1568 favorably passed.

CS/SB 1714 Relating to Citizens Property Insurance Corporation sponsored by Senator Alan Hays was temporarily postponed without any discussion.

Should you have any questions or comments, please contact Colodny Fass.

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