Senate General Government Appropriations Committee Report–April 8

On Tuesday, April 8, 2008, the Senate General Government Appropriations Committee (“Committee”) considered the following two bills relating to property insurance as part of its regularly-scheduled agenda.

• Senate Bill 2156 by the Banking and Insurance Committee relating to the Florida Hurricane Catastrophe Fund (“FHCF”).
• Senate Bill 2860 by Senators Jeff Atwater (R- North Palm Beach) and Steve Geller (D- Hallandale Beach) relating to insurance.

Both bills passed with amendments. Below is a brief description of each bill, along with the actions and discussion that took place during the meeting regarding the bills.

Senate Bill 2156

Senate Bill 2156 passed the Committee unanimously. The bill eliminates the Temporary Increase in Coverage Limit Options (“TICL”) of $10 billion, $11 billion, and $12 billion, so that a maximum of $9 billion in TICL coverage will be offered in addition to the mandatory FHCF coverage. Also, the bill changes the TICL option to offer only reimbursement of 70 percent of the insurer’s losses within the TICL layer purchased.

Florida Chief Financial Officer Alex Sink applauded the Committee for unanimously passing SB 2156 , which reduces Floridians’ risk of hurricane assessments from the Florida Hurricane Catastrophe Fund.

“Eliminating $5.5 billion of hurricane assessment risk after a bad storm is the fiscally responsible thing to do,” said CFO Sink. “I thank Senator Alexander, Senator Lawson, Senator Posey and their colleagues for their leadership and support of this bipartisan proposal to reduce the risk of hurricane assessments on Floridians and businesses.”

Senate Bill 2860

Senate Bill 2860 passed the Committee with a strike-all amendment and additional amendments to the strike-all. For your review, we have included a summary of the primary strike-all amendment.

The strike-all was explained by Senator J.D. Alexander (R- Winter Haven). The bill, as amended, makes major changes to Florida’s insurance laws by increasing penalties for violation of the Insurance Code. It accomplishes this by changing standards and procedures for property insurance rate filings, applying Florida’s anti-trust laws to the business of insurance, prohibiting unfair claims handling practices, freezing rates and changing coverage and assessments for Citizens Property Insurance Corporation (“Citizens”), revising windstorm mitigation premium credits, requiring approval of non-renewal plans, and revising conditions for state-funded surplus notes to insurers.

There was significant discussion and testimony regarding the bill. Many insurance industry representatives expressed the view that the amended bill improves the original bill, but continues to contain very harsh penalties and is extremely punitive towards insurance companies.

Citizens’ representatives encouraged the Committee members to fund the Insurance Capital Incentive Build-Up Program from funds other than from Citizens’ surplus. Business groups such as the Florida Chamber of Commerce and Associated Industries of Florida were concerned about SB 2860 because it increases the potential for assessments, increases regulatory fines, and artificially suppresses Citizens’ rates.

Following industry testimony, Senator Al Lawson (D- Tallahassee) was the only “no” vote on the bill. He expressed concerns with the anti-trust provision, Citizens’ ability to charge less than actuarially-sound rates, and inland policyholders supplementing expensive, coastal properties.

Senator Mike Bennett (R- Bradenton) stated, “We hear your concerns and will continue to work with you [insurance industry].”

In closing, Senator Atwater noted that SB 2869 could provide relief from assessments because it allows Citizens to write more than wind-only policies. Also, he indicated a willingness to negotiate with the industry on the increased fines. He expressed his view that insurance companies should be able to pay uncontested claims within 90 days.

The companion bill is HB 7021, sponsored by State Representative Ron Reagan (R-Sarasota/Bradenton).

 

Please feel free to contact this office should you have any questions regarding the above matters.

 

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