Free Market James Madison Institute Makes Florida Property Insurance Market Reform Recommendations

 

Opening Citizens Property Insurance Corporation (“Citizens”) to takeouts by excess and surplus lines carriers was among a lengthy list of reforms proposed in a 20-page document on Florida’s property insurance market published by the James Madison Institute today, January 26, 2015.  

To view the document, click here.

Authored by R.J. Lehmann, a longtime journalist known for his espousal of free market principles, the report also makes the following recommendations:

 

Citizens Reduction and Reform

• Continue incremental reduction of Citizens coverage limits for two ad­ditional years, to $500,000
• Remove non-primary residences from Citizens, with exceptions
• Implement incremental Citizens eli­gibility reform with a “circuit-break­er”
• Allow excess and surplus lines carri­ers to take out policies from Citizens, with conditions
• Establish stricter notification re­quirements for future depopulation initiatives

 

Florida Hurricane Catastrophe Fund (“FHCF”) Reduction and Reform

• Gradually decrease the FHCF’s statutory capacity from $17 billion to $14 billion, with an emergency “override”
• Gradually increase the FHCF’s statutory deductible from $7 bil­lion to $8 billion
• Surplus protection mechanism to cover second-year claims
• Explicitly authorize (but not require) FHCF managers to negotiate the purchase of private risk transfer
• Allow flexibility to primary insurers in years when the FHCF is pro­jected to experience a shortfall
• Include the goal of taxpayer protection in the FHCF’s mission statement
• Require reports from financial ad­visors to explicitly discuss second event and second season claims-pay­ing capacity
• Redefine “funds” or “cash balance” as “any money that does not have to be repaid”
• Include taxpayer protection efforts in bi-annual reports

 

Claims-Paying Estimate and Conflict-of-Interest Reform

• Require an annual report on the combined post-storm bonding ca­pacity of Citizens, the FHCF and the Florida Insurance Guaranty As­sociation, assuming all three may at­tempt to issue bonds simultaneously after a significant hurricane event or season
• Enact conflict-of-interest rules to preclude financial advisers from de­riving financial gain from bond issu­ances

 

 

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