TALLAHASSEE — Florida's mammoth state-run insurance company is looking to downsize, with lawmakers turning to unregulated out-of-state carriers to help with the effort.
The state House passed a bill on Friday that would allow so-called "surplus lines" carriers to take over policies from Citizens Property Insurance Corp., if they meet certain criteria.
Surplus lines carriers are not regulated by the Office of Insurance Regulation and can differ greatly from the state's admitted insurers, a point that opponents of the bill pushed repeatedly.
"Everyone agrees that Citizens needs to be smaller, but the way to do that is not to allow essentially unregulated companies to move in like vultures," said Sean Shaw, founder of Policyholders of Florida. "This is essentially deregulating the insurance market in Florida for rates."
Bill sponsor, Rep. Jim Boyd, R-Bradenton, included several safeguards to raise the barrier of entry for surplus lines insurers looking to pick up clients in Florida. For example, the carrier would have to have at least $50 million in surplus, a strong financial record and enough resources to withstand two massive hurricane hits. The insurer also must offer homeowners coverage that is similar to their Citizens policy.
"Surplus lines carriers have been (operating) in this marketplace for years on the commercial side and actually they're very good, very strong and very competitive," Boyd said.
Still, opponents of the bill pointed out some major differences between Citizens and surplus lines insurers, which typically have higher premiums. For example, surplus lines carriers can raise their rates by any amount, and if they become insolvent, the Florida Insurance Guaranty Association will not offer homeowners a safety net for paying claims.
Under the proposal, homeowners could be automatically shifted into a surplus lines account if they do not opt out within 30 days of being notified. However, consumers who are unhappy with their new carrier could later return to Citizens.