narrow proposals in hopes
reining in costly home insurance
Article Courtesy of The Sun Sentinel
Published January 11, 2007
lawmakers came closer than ever Wednesday to agreeing on an exit strategy
from the state's property insurance crisis: legislation that would deliver
potential savings to homeowners, but also force taxpayers to shoulder more
risk of massive hurricane losses now assumed by private insurance
Gov. Charlie Crist will unveil his own proposals this morning. They are
expected to mimic many of the Legislature's recommendations.
While much uncertainty exists about what savings would reach consumers'
pocketbooks from any of the proposals, one likelihood is the state's
Hurricane Catastrophe Fund will be substantially expanded and new
financial relief will go to insurers and then could be passed along to
But none of the legislative proposals being readied for a seven-day
special session on insurance that is to begin Tuesday guarantees a rate
cut for the four out of five homeowners statewide covered by private
Whatever is approved, South Floridians are likely to be among the chief
beneficiaries. With about half of its customers in Broward, Palm Beach and
Miami-Dade counties, Citizens Property Insurance Corp., the state-backed
insurer of last resort, could be reorganized and its rates frozen.
House Republicans have filed bills that would oust members of the
oversight board of Citizens and halt major price increases. They also
would freeze Citizens' rates at 2006 levels and revoke changes legislators
made last year that would drive Citizens rates even higher.
Key to a group of House bills is a proposal requiring private insurance
companies that purchase low-cost reinsurance from the state to pass along
savings to consumers. House leaders said the measure would mandate at
least a 25 percent overall savings for those consumers, but the proposals
include a number of loopholes that could reduce those savings or block
Overlooking those loopholes, Rep. David Rivera, a Miami Republican who
represents parts of Broward County, said legislators are "calling
insurance companies' bluff. Now they (insurance companies') have to put
their money where their mouth is.''
Without being specific, House Speaker Marco Rubio acknowledged there
probably are shortcomings with the House legislation but said there are
enough pro-consumer elements to the property insurance package to please
Floridians who have suffered double- and triple-digit premium increases in
"We understand some of the risks inherent in some of the measures
that we're taking,'' said Rubio, a Republican from West Miami. ``But we
understand the realities of what this (insurance crisis) is doing to our
economy, if we do nothing or we allow what exists now to continue.''
A new Senate proposal unveiled Wednesday calls for a cap of about $20
billion on claims insurance companies would be required to pay, if a big
storm hits the state. Taxpayers would be responsible for picking up the
tab if the costs rise above the cap. Computer models used by the Senate
indicate a storm that big is expected only once in 50 years.
"What insurance companies need is predictability. If we tell them we
are capping their maximum exposure for the storm that is unlikely to ever
hit in anybody's lifetime, they indicated they are willing to come up with
dramatic rate reductions,'' said Senate Democratic leader Steve Geller, of
Hallandale Beach, who proposed the liability cap.
Senate leaders say a state promise to help pay for a big storm would lower
the amount of expensive reinsurance that insurance companies now purchase,
bringing down rates for homeowners and encouraging more private insurers
to return to the state.
"Insurance companies are tripling their rates because they're afraid
of the big one," said Senate Insurance Committee Chairman Bill Posey,
R-Rockledge.The insurance lobby reacted guardedly to the proposals,
offering few public comments. But Guy Marvin, president of the Florida
Insurance Council, an industry trade group, warned against any action by
the Legislature that could punish insurance companies.
"The insurance industry is not the enemy,'' he said.
`"Hurricanes are the enemy. ... Insurance companies met their end of
the bargain by paying out $35 billion in claims (after the 2004 and 2005
Earlier in the week, Sam Miller, also from the state insurance council,
cautioned against legislative strategies to lower premiums, saying
consumers could face higher costs after a catastrophe if special
assessments on insurance policyholders are needed to make up a deficit in
Citizens' accounts or the Florida Hurricane Catastrophe Fund.
Provisions in the Senate bill would slice 25 percent off Citizens
customers' insurance bills, said company spokesman Rocky Scott. One of
those provisions would allow the state-backed insurer to issue full
homeowner policies in "high-risk'' areas, which in South Florida
generally include people living east of Interstate 95.
Customers living outside the high-risk area also could save money on their
premiums, though the company does not have estimates on their potential
savings should the Senate bill pass, Scott said.
Major components of the House and Senate bills would eliminate many of the
provisions of the insurance law passed in the final minutes of the 2006
legislative session last May. For instance, a provision of the Senate bill
would remove the legal requirement that Citizens raise rates dramatically
by March so it would have cash on hand to pay future claims from storms.
"Circumstances have changed dramatically,'' Rubio said, referring to
the turnabout by the Legislature.
Democrats, who are in the minority in both chambers, gave tentatively rosy
assessments of the proposals.
"There really doesn't seem to be a philosophical divide,'' House
Minority Leader Dan Gelber, D-Miami Beach, said. "What you have here
(in the House plan) are a number of things we (Democrats) have been
talking about ... It's a pretty good first step.''