TALLAHASSEE — For six years, Mother Nature has granted Florida uncommon tranquility along its 1,200-mile coastline, where the state's peninsular mass dangles precariously in some of the world's most hurricane-prone waters.
During that probability-defying streak of hurricane-free seasons, Florida's largest insurer of homes — state-run Citizens Property Insurance Corp.— has seen its exposure to risk skyrocket and its financial outlook deteriorate.
As state lawmakers began their legislative session last month, they heard a crescendo of cautionary cries from a growing chorus of fiscal hawks. Their message: A major hurricane could wreak unprecedented havoc on Florida's fragile economy.
Six weeks later, there has been little political will to pass large-scale reforms and prepare Citizens for another Andrew, or a Katrina.
With redistricting at the forefront and elections looming, the lack of legislative fervor for insurance reform is understandable: The changes deemed necessary by the insurance industry would almost certainly lead to higher premiums for homeowners and attach additional costs to the state's troubled real estate market.
For its part, Citizens has taken on a growing share of the risk-reduction effort, with a series of controversial moves that have sparked consumer outcry and lawsuits.
Joining the majority of lawmakers hesitant to increase premiums in a tough economy are several legislators who believe there is no need to fundamentally remake Citizens at this time. They say the profit-chasing insurance industry is pushing for premium increases, using apocalyptic language to exaggerate how much taxpayers might have to pay in assessments after a storm.
"If a Hurricane Andrew were to hit today in Miami-Dade County, there's enough (insurance) money to pay for it, and the assessment is going to be about $40 to $100," said Rep. Frank Artiles, a Miami Republican.
Artiles has been critical of some of the property insurance measures advanced by the Legislature, including a plan to allow unregulated out-of-state surplus lines insurers to take over policies from Citizens. That measure, HB 245, passed the House on a 66-48 vote this month, but it would affect only about 40,000 of Citizens' 1.5 million policyholders.
Last year, lawmakers passed a sweeping package of controversial overhauls that allowed Citizens to raise rates on sinkhole coverage and increase prices to cover rising costs. Though Citizens has greater exposure to risk and more financial problems this year, leading lawmakers have not shown interest in passing broad reforms, or rubber-stamping the rate increases that come along with them.
Fundamental to the debate is whether Citizens' financial troubles warrant major reforms and premium hikes.
Six hurricane-free years have allowed the insurer to build up a cash surplus of about $6 billion. But its level of exposure has more than doubled since 2005, and it now is exposed to a maximum $511 billion in potential claims.
In addition to cash on hand, Citizens has backup insurance commonly known as reinsurance. But most of its reinsurance comes from a sister entity, the Florida Hurricane Catastrophe Fund, which also has major money problems. A direct hit by a large hurricane — or a series of back-to-back storms — could max out both Citizens and the Catastrophe Fund, leaving consumers to pick up the tab. Industry estimates say that tab could reach several billion dollars, and would impact auto insurance premiums as well.
Looking to fix the problem — and not running for re-election due to term limits — Sen. JD Alexander, R-Lake Wales, filed a bill that would shore up the finances of the overleveraged Catastrophe Fund by reducing its size and liability. The bill, which would raise premiums by an average of 10 percent over three years, had not gained much traction in the Legislature before last week.
"Win or lose elections, or whatever it comes, I'm not going to live my life in fear," Alexander told fellow senators during a late-session first-hearing of his bill last week. "If we allow this state to put ourselves in devastating financial conditions, because we've obligated beyond our ability to pay, shame on us."
The committee voted 9-1 to advance the measure, but similar legislation has not moved in the House, so the proposal is not likely to become law this year.
The lone dissenting vote came from Sen. Mike Fasano, R-New Port Richey, an outspoken critic of Citizens and any attempts to increase its rates.
"I have great concerns about the piece of legislation because it's going to raise rates on the backs of policyholders throughout the state of Florida, no ifs, ands or buts," he said. "This is not the time that, when people are struggling and homeowners are struggling … to add on to what they're already paying in premiums."
Other proposals for large-scale reform have run up against similar criticism, keeping them from moving forward in a year dominated by redrawing the political maps and drafting the state's budget.
In the absence of major statutory reform, Citizens has launched a controversial risk-reduction crusade of its own.
Bound by state law that limits most premium increases to 10 percent annually, and a mandate to insure those who cannot find affordable coverage in the shrinking private sector, Citizens' size and risk have ballooned in recent years.
Looking to reverse that trend, the insurer has made several coverage and policy changes, drawing criticism from homeowners who have seen their coverage dropped or their premiums jump.
Citizens told agents last November that it would no longer acknowledge independent appraisals in determining the replacement values of homes, opting instead to rely on a software program called 360Value.
Earlier this month, two New Port Richey homeowners filed a class-action lawsuit against the state-run insurer, claiming the company used its software system to overvalue their homes and raise their premiums.
Ruth Lauro of New Port Richey said her insurance costs more than doubled last year after Citizens gave her aged two-bedroom home a replacement value of $124,000. Lauro, 82, said an appraiser found contractors willing to rebuild the home for less than half that amount. "They really did me in," she said. "They increased my flood insurance from $400 to $800. I've never had a puddle near my house."
The company has denied the allegations, and has since reversed course on its decision to rely exclusively on the 360Value system.
Policy changes also are aimed at luring more private insurers to Florida. Dozens of insurers have failed or fled the state in the wake of the active 2004 and 2005 hurricane seasons.
Last July, Citizens' board of directors discussed selling all or part of the company to a private entity. But no buyer has materialized, and Florida's precarious position between the Atlantic Ocean and the Gulf of Mexico makes it a hard sell.
"The reality is this: Citizens is going to be here and it's not going to go anywhere," said Artiles, a public adjuster and licensed general contractor. "The private insurance market is not going to come to Florida because of risk versus reward."
Toluse Olorunnipa can be reached at email@example.com.