Lawmakers told to overhaul property insurance
A coalition pushes for reform to help prevent economic disaster.
By Brandon Larrabee
Story updated at 9:15 AM on Friday, Apr. 3, 2009
TALLAHASSEE – A sweeping overhaul of Florida’s property insurance system is the only thing standing between the state and a financial disaster, a coalition of business groups, environmentalists and lawmakers said Thursday.
The changes include reducing insurance policies that rely on the taxpayer-backed Florida Hurricane Catastrophe Fund, shoring up the state’s Citizens Property Insurance Company and allowing companies to sell wind-insurance policies without state regulation.
Supporters said at a news conference Thursday that those revisions are needed to save the state severe economic pain or even bankruptcy if a major storm were to strike.
"Without change, the state is in massive trouble. The entire Florida insurance apparatus, indeed, has become essentially insolvent," said Eli Lehrer, a senior fellow at the Competitive Enterprise Institute, a Washington-based think tank that pushes for smaller government.
A measure set to be heard today by the House Insurance, Business and Financial Affairs Committee would increase Citizens property insurance premiums by up to 10 percent a year and would allow the CAT fund to gradually shed some of the risk it holds. The CAT provides insurance to companies who sell policies to property owners.
"Citizens Property Insurance Company and the CAT fund do not have sufficient reserves to pay the large claims that will come due when a large hurricane hits Florida," said Rep. Alan Hays, R-Umatilla.
Under the measure, the CAT fund would reduce the amount of reinsurance it provides by $12 billion over the next six years. Meanwhile, Citizens rates would rise until they were in line with what is needed to make the company solvent. The plan would also funnel $26 million of the new premium money to bankroll a program that assists property owners looking to fortify their homes against storm damage.
A measure, by Rep. Bill Proctor, R-St. Augustine, would allow companies to create wind-insurance plans insulated from state rate controls. State Farm Florida announced earlier this year that it would pull out of the state’s property insurance market after the Office of Insurance Regulation turned down its request for a rate increase that would have averaged 47 percent statewide.