Florida’s Hurricane Insurance Market Task Force re Final Report 2/16/2006
Jan 4, 2007
The Task Force on Long-Term Solutions for Florida’s Hurricane Insurance Market released its draft final report ahead of its final scheduled meeting on February 27th. Simultaneously, the House leadership released its proposed property insurance package, which includes several Task Force recommendations, but also some other hot topics. The Task Force, which includes insurance industry representation, has accelerated its deliberations to issue a final report prior to the commencement of the 2006 Session.
The draft final report’s notable recommendations include:
Eliminating the Panhandle exemption from the wind-borne debris requirements of the building code;
Continued focus on mitigation and retrofitting as public policies;
Limiting eligibility for Citizens to homes with a structure value of less than $1 million;
Regulatory authority for flex-band rating for homeowners, and permitting insurers to use a manual rate for properties valued over $1 million to permit competition with the surplus lines market for the above;
Opposition to any linkage of insurance lines as a barrier to entry or operation in Florida;
Increasing the FIGA coverage cap on dwellings to $500,000;
Further review of the FHCF capacity and retention levels;
A rapid-cash buildup factor for the FHCF;
A constitutional amendment protecting FHCF assets;
Numerous Citizens recommendations focused on reducing coverages and costs, and increasing takeouts; and,
Caution on any statutory effort to shrink the wind pool lines.
Notable by its absence was any mention of an earlier series of recommendations to require private insurers to service and adjust claims for Citizens policyholders.
Unfortunately, that component did make it into the draft legislation released by the House. At a press conference this week, Speaker Pro-Tem Leslie Waters, House Commerce Council Chairman Frank Farkas, House Insurance Committee Chairman Dennis Ross, and Rep. Don Brown unveiled an ambitious and largely positive package of measures (attached with staff sumary.)
Some of the draft legislation’s notable recommendations include:
Establishing an endowment to fund no-interest loans for mitigation and retrofitting, funded by a $100 million general revenue appropriation;
Allowing a flex-band rate filing for residential property insurance of no more than 10% statewide average and 25% for any one territory, no more than once per twelve months;
Prohibition of further regulatory review of hurricane models already approved by the Commission on Hurricane Loss Projection Methodology;
Separating homestead from non-homestead properties in Citizens, and knowingly subsidize homestead property insurance rates at the 50-year PML level using the current assessment base, while requiring 250-year PML rates and self-assessable policies for non-homestead properties;
Limiting eligibility for Citizens to homes with a structure value of less than $1 million, and exempting from rate approval admitted insurers who wish to write those policies in competition with the surplus lines market;
Re-authorizing the replacement cost holdback for personal property (but not for structures);
Requiring a 25% rapid-cash buildup factor for the FHCF;
Requiring the OIR, using the normal administrative procedures process, to promulgate standardized requirements for insurance operations after a natural disaster, and prohibiting the issuance of emergency rules for same;
FIGA revisions; and,
Eliminating the Panhandle exemption from the wind-borne debris requirements of the building code;
�
The most notable is the “write-your-own wind” provisions on pages 28-30 of the draft, which require private insurers to issue, service, and adjust Citizens policies for a fee, with Citizens acting merely as a funding mechanism. The draft contains language attempting to hold insurers harmless for any funding or liability problems that might occur.
The FAIA issued a press release praising the legislation, and focusing on how making private insurers service and adjust Citizens policies could result in $100 million worth of savings and greater consumer satisfaction. The press release did not make any mention of commissions.
Chief Financial Officer Tom Gallagher, a Republican candidate for Governor, immediately issued a press release (also attached) that didn’t appear to directly comment on the proposal. Gallagher did state that “Many of the proposals from my comprehensive property insurance reform package continue to gain support from legislative leaders in both the House and Senate.”
We will continue to monitor developments and provide updates accordingly. Should you have any questions or concerns, please feel free to contact this office.
Regards,
Katherine A. Scott