Measure raises hurricane stakes for all
Article Courtesy of The Sun Sentinel
Mark Hollis and Kathy Bushouse
Published May 5, 2007
for Citizens Property Insurance Corp. policy holders will be frozen until
January 2009, and more people could opt for Citizens' coverage under
legislation passed Friday.
But the savings enjoyed by Citizens policy holders might mean big
increases in the future for all insured Floridians. The legislation
essentially raises the risk that all Floridians would pay an extra charge
on their home and auto policies to bail out the state-backed company
should a major hurricane hit Florida, a scenario that worries some state
officials, including state Chief Financial Officer Alex Sink.
The changes, backed by Gov. Charlie Crist, accomplish one of the
governor's goals for this legislative session: making Citizens more
competitive in the hopes of saving Floridians more money on their property
Citizens' customers will pay rates set at December 2006 levels for at
least another year, extending a freeze enacted during January's emergency
session on property insurance. It also means customers with private
insurance companies can opt for a Citizens policy if their premiums are at
least 15 percent more than what Citizens charges -- a lower figure than
the 25 percent threshold legislators enacted during January's session.
The bill also accomplishes another Crist pledge to prohibit national
insurance companies from creating new Florida-only subsidiaries. The
legislation also requires existing subsidiaries of companies such as State
Farm, Allstate and Nationwide to report their parent companies' profits as
part of a rate increase request.
The legislation, passed Friday by the House of Representatives after the
Senate voted on it earlier in the week, is now on its way to Crist for his
The Legislature's action is "huge," said Crist, who took the
rare step of testifying before the Senate in favor of the plan.
Citizens is already the largest insurance company in Florida, with almost
1.3 million policy holders -- almost half of them in South Florida.
Letting Citizens become more competitive with the private market "was
the second half of finishing the job" that legislators started during
the January emergency session on property insurance, Crist said.
Crist told legislators after the session ended Friday afternoon that they
"put the nail in the coffin" on the insurance industry with
their vote allowing Citizens to be more competitive. More people would be
able to switch into Citizens to avoid major rate increases by private
insurers. Until this year, people could only get a Citizens policy if no
private companies would take them.
"That was right, and just, and fair, and important, and you did it.
God bless you for fighting for the people of Florida," Crist said.
"I heard some groans from insurance lobbyists. Tough. ... There's a
new day in this place."
Industry officials countered that the move simply put more Floridians in
financial peril should hurricanes hit. "The governor got everything
he wanted, again, which means we're now one step closer to the financial
catastrophe we've predicted," said William Stander, assistant vice
president of the Property Casualty Insurers Association of America.
Citizens officials said Friday they're still not sure how the rate freeze
will affect the state-backed company, nor do they know how many new policy
holders to expect because of the lower threshold to get a Citizens policy.
Sink said that while rate relief is needed, she's concerned about what
will happen if a hurricane hits the state in the next two years.
"We needed rate relief. But to go another 24 months without
evaluating what a sound rate would be [for Citizens] is not a good fiscal
idea at all," Sink said. "The more they get in a hole about the
rates they charge, then the higher the risk [of assessments] when a storm
Florida's property insurance policy holders paid extra charges on their
insurance bills after Citizens ran out of money in the wake of the 2004
and 2005 hurricane seasons. The company had a $516 million deficit in
2004, and a $1.7 billion shortfall in 2005.
And because of changes the Legislature made in January, automobile
insurance policy holders also will pay to make up future Citizens'
Before voting on the Citizens bill Friday, some Central Florida
legislators sought an end to such assessments, a move that sparked a
Allowing other insurance customers to pay assessments for Citizens
"is as close to a socialist policy that we've ever come to,"
said state Rep. Dennis Ross, R-Lakeland, who sponsored an amendment to bar
The amendment failed. State Rep. Julio Robaina, R-Miami, urged
colleagues to reject it, saying it would not help in offering rate relief
to their constituents.
"We have a governor in this state who's made a commitment that [lower
premiums] is something that we must give people this year," Robaina
said. "What are we going to do? Are we going to go home and say we
did nothing else to better the insurance situation in the state of