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Florida legislators try to tackle homeowners insurance issues

Two major pieces of Florida insurance legislation — one that would reduce the state's risk in the event of a catastrophic hurricane, another that would both tighten restrictions on insurance companies and freeze Citizens Property Insurance rates until 2010 — breezed through the Senate Banking and Insurance Committee on Tuesday.

The most sweeping proposal, SB 2860 introduced by Sen. Jeff Atwater, R-North Palm Beach, and cosponsored by Sen. Mike Fasano, R-New Port Richey, includes more than a dozen provisions aimed mostly at increasing penalties for companies that break Florida law, and at more clearly defining how insurers set their rates.

The proposals also include a rule that would force residential insurers planning to drop more than 10,000 policies to notify the state 90 days in advance, and to stagger the dropped policies "over a reasonable period."

A two-year freeze on Citizens rates is scheduled to expire at the end of 2008. Atwater's bill would extend the freeze for another year and cap rate hikes at 10 percent from 2010 through 2012.

The second bill, SB 2156, would lower the state's hurricane catastrophe fund by $3-billion. Last year, lawmakers increased the fund by $12-billion to help lower homeowners premiums. But even with the fund at a record $28-billion, rates did not drop as much as expected, and analysts warned that the added risk the state is placing on itself far outweighs the benefit.

Both measures head now to Senate President Ken Pruitt, who can refer the bills to another committee or to the Senate floor for debate.

There is a companion bill for the CAT Fund measure in the House, but no companion bill for the Atwater proposal.

"We are advancing a culture of accountability with what we're doing," Atwater said. "Fines have not changed since 1982. And what is so wrong about filing a rate you can defend?"

Citizens board chairman Bruce Douglas has warned that rates, which are set by the state, must rise to allow the state's largest insurer to more adequately cover claims.

But Atwater said that as of just a few days ago, 98,000 policies have been taken out of Citizens this year, proving that the former insurer of last resort is attractive to some private companies.

Insurance industry officials generally favored the CAT Fund reduction, but had problems with Atwater's bill. Industry representative William Stander argued that the proposal "gets us no closer to reaching our goal of protecting homes and further restricts the ability of insurers to compete."

That prompted this exchange between Stander and Sen. Bill Posey, R-Rockledge, the committee chairman.

Posey: "What were industry profits last year?"

Stander: "I don't know."

Posey: "Wasn't it $3.7-billion in Florida alone? And where are those dollars?"

Stander: "In bank accounts waiting to pay claims."

Posey: "If we have another big storm, and if there were no Citizens or CAT Fund, wouldn't policyholders still be called on to pay? They (insurers) won't reassess?"

Stander: "There are differences in companies."

Later, Posey added, "Nobody likes being in the position we're in. This is not a perfect solution. It's just the best one we know."

Chief Financial Officer Alex Sink lent her support to the $3-billion decrease in the state's catastrophe fund even though she acknowledged it could increase premiums "slightly."

"There is a serious concern we wouldn't be able to issue $28-billion in bonds if we had to," Sink said. "This bill represents a moderate step forward to reduce the exposure."

Then Sink turned to address any reinsurance officials in the gallery. "There is a concern here about how reinsurers will treat us," she said. "If the reinsurance market takes advantage of this move to lay off our risk, you'll have me to deal with."

With more than a month left in the current legislative session, the fate of each bill is unclear. But there were signs, at least where Atwater's bill is concerned, that the going could be rough.

"The House seems to be going in the opposite direction we are," said Sen. Steve Geller, D-Hallandale Beach.

Tom Zucco can be reached at zucco@sptimes.com or (727) 893-8247.

. Fast facts

Key provisions
of SB 2860

• Extends the freeze on Citizens rates from 2009 to 2010, and caps the rate increases at 10 percent through 2012.

• Increases maximum fines up to $100,000 for violations of insurance code and removes aggregate cap.

• Requires insurers to notify regulators 90 days in advance if the company will drop more than 10,000 policyholders, and to stagger the nonrenewals.

• Requires insurers to file claims-handling practices as a public record.

• Makes permanent the requirement that insurers file for a rate increase before implementing it.

• Requires insurers to use only state-approved hurricane-loss models when setting rates, and that the models not be modified.

• Allows homes with a replacement cost of $1-million or more to be covered by Citizens.

Florida legislators try to tackle homeowners insurance issues 03/25/08 [Last modified: Thursday, March 27, 2008 9:20am]
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