Lawmakers turn attention to insurance

Senate plan would cap rates, but accord may be hard to reach

Herald Tribune--Mar. 26, 2008

TALLAHASSEE While Florida lawmakers have eagerly embraced plans to slash property taxes, the House and Senate may have more difficulty finding agreement on another major cost dragging down the state’s real estate market: property insurance.

A plan unveiled by the Senate on Tuesday would cap property insurance rates for another year for customers of Citizens Property Insurance, the state-run insurance fund that is now Florida’s largest residential insurer. But in an effort to slightly reduce the state’s financial risk in the case of a major hurricane, the Senate also backed a bill that would reduce the state hurricane catastrophe fund by $3 billion, although that could lead to a statewide rate hike in the range of 3 percent.

"This is not a perfect solution," said Senate Banking and Insurance Committee Chairman Bill Posey, R-Rockledge. "It’s just the best one we know."

The Senate and the House appear to be favorably inclined to back a plan from Chief Financial Officer Alex Sink that would reduce the state’s exposure in the hurricane catastrophe fund by $3 billion, from its current $28 billion level.

But Senate analysts warn lessening the state’s role in providing cheaper reinsurance could lead to rate hikes in the range of 1.5 percent to 3.4 percent statewide because insurers will have to replace the state reinsurance with more costly private reinsurance. In some areas, such as Miami-Dade County, the rate increases could exceed 8 percent.

Sink, though, urged insurance companies not to use the occasion to dramatically increase their rates.

Turning to face an audience of insurance lobbyists, Sink said: "You’re going to have me to deal with, and trust me, you don’t want to deal with me."

House Speaker Marco Rubio, R-West Miami, indicated Tuesday that the House may go along with the Senate plan to continue the rate freeze for Citizens, which now has 1.3 million policies. Citizens’ rates were frozen last year but the freeze will expire on Jan. 1 unless lawmakers act.

The Senate plan would continue the freeze until 2010 and then further limit increases through 2012 to no more than 10 percent a year, or 15 percent in the case of wind-only policies.

But some senators and House members believe Citizens’ rates need to be increased to more accurately reflect the state insurer’s risk. And they argue that if Citizens has another deficit — like it had after the 2004-05 hurricane seasons — it will result in an assessment on all non-Citizens insurance policies.

"When the wind blows, all non-Citizens policyholders will pay to bail Citizens out," said Sen. Al Lawson, D-Tallahassee, who voted against the rate freeze.

Florida Insurance Commissioner Kevin McCarty praised the Senate insurance package, which was sponsored by Sen. Jeff Atwater, R-North Palm Beach, calling it "consumer-focused legislation."