Storm Continues to Brew over Reforming Citizens Property Insurance

The following article was published in The Sunshine State News on March 6, 2012:

Storm Continues to Brew over Reforming Citizens

By Jim Turner

A bill to reduce the number of policies handled by the bloated Citizens Property Insurance Corp. will advance to a full Senate vote as early as Tuesday.

However, an amendment narrowly added to the bill on Monday, in a 21-18 vote that included a number of Republicans, could be enough of a disturbance to sweep away the effort to reform the state-run Citizens.

Sen. Garrett Richter, R-Naples, sponsor of CS/HB 245, called the amendment introduced by Sen. Thad Altman, R-Melbourne, “overkill,” saying the requirement will keep new insurance companies from wanting to come to Florida.

“I think that amendment will kill the effectiveness of what we’re trying to do,” Richter said.

Senate President Mike Haridopolos, R-Merritt Island, said there is still time to work behind the scenes to change some minds.

“We’re trying to depopulate Citizens because every one of us, 19 million Floridians, are on the hook,” he said.

“I’d rather try to move around a little bit of that risk, not just put it squarely on the taxpayers … Clearly, there are some who have a different agenda.”

How the GOP voted:

For the amendment: Sens. Thad Altman, Charles S. “Charlie” Dean, Nancy Detert, Paula Dockery, Mike Fasano, Anitere Flores, Rene Garcia, Dennis L. Jones, Ronda R. Storms, Evelyn J. Lynn, Jim Norman.

Against: Sens. Andy Gardiner, Michael S. “Mike” Bennett, Ellyn Bogdanoff, J.D. Alexander, Don Gaetz, John E. Thrasher, Lizbeth Benacquisto, Mike Haridopolos, Alan Hays, Joe Negron, Garrett Richter, David Simmons, Stephen R. Wise, Steve Oelrich, Alex Diaz de la Portilla, Jack Latvala.

No Democrat voted against the amendment.
With 1.47 million policyholders at the start of the year, the goal for Citizens is to shave 7 percent of its risk, including $1 billion in coverage from properties that overlook the Atlantic Ocean and Gulf of Mexico, reducing the number of overall policies to 800,000.

Richter’s bill would allow third parties, known as surplus-line carriers, to take over policies from Citizens.

Surplus-line carriers are not regulated by the Office of Insurance Regulation and can differ greatly from the state’s admitted insurers, a point opponents of the bill have pushed repeatedly. 

Altman’s bill would require the surplus-line carriers to get each policyholder to sign a letter of understanding acknowledging they are being moved to a new carrier.

Altman said the amendment will give homeowners a choice if they want to be covered by a surplus-line carrier.

Richter said the additional burden of getting policyholders to sign off on a change of carriers will not be worth the effort for many companies.

“They’re not going to come in,” Richter said. “If they want to take 30,000 policies out, they have to get 30,000 signatures, and the effort and energy to do that, they’re just going to leave their capital and go to some other state.”

Sen. Mike Fasano, R-New Port Richey, who has been at the front of the effort among senators to defeat the surplus-line bill, said Floridians won’t want to go into an unregulated company.

“When the 100-year storm comes, they’ll be under blue roofs (tarps used to cover damaged roofs) for years to come because they can’t get surplus-line companies to pay for years,” Fasano said.

Richter said surplus-line carriers are already in the state, handling approximately 90,000 residential policies and that the state insurance commission can prohibit a carrier from continuing in the state if they failed to pay claims in a “reasonable” amount of time.

The bill is one of two efforts to revamp Citizens before the regular session ends on Friday.

A second bill, SB 1346, approved by the House and on Saturday by the Senate Budget Committee, could reduce how much private insurers — and in turn their customers — must immediately pay to cover costs that Citizens can’t handle after a storm.

The bill reduces costly coastal policy lines from 6 percent to 2 percent and reduces assessments that would be placed on customers of private companies after the standard 15 percent assessment imposed on Citizens’ approximately 1.4 million customers in the year after a storm.

Currently, private insurers have 30 days to pay any post-storm shortfall experienced by Citizens, with the fiscal impact expected to be drawn the following year from the private insurance company’s customers.

Under the proposed bill, the private companies wouldn’t be required to pay Citizens the full amount, thus reducing the annual impact to its customers.

The bill is backed by the Florida Chamber of Commerce, Associated Industries of Florida, the Florida Office of Insurance Regulation, and Citizens.

The Senate version includes an amendment, added Saturday, that could reduce the Florida Hurricane Catastrophe Relief Fund from $17 billion to $15 billion.

The fund is used to help private insurance companies following a storm.

The move, along with a possible 2 percent increase in premiums from the private insurers, should make the Cat fund more stable for future bonding.

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