The latest plan to revive the insurance business in Florida can prevent companies from fleeing when a moratorium on cancellations expires next year, Insurance Commissioner Bill Nelson said Tuesday.
Lawmakers have extended the moratorium four times since companies started dropping policies after Hurricane Andrew rocked the insurance industry with $16-billion in storm losses in South Florida in 1992.
The moratorium forces companies to do business in high-risk areas by limiting the percentage of Florida policies a company can drop and the number it can cancel in a given year. "It is unlikely a court will let us extend it another time," Nelson told the House Financial Services Committee.
However, Nelson said the plan he has been proposing in appearances around the state since August will attract insurers to the state and cause property owners' premiums to drop an average of 10 percent due to the increased competition.
The plan involves expanding the state's current catastrophic fund, designed to start reimbursing insurance companies after they pay out $3.2-billion in losses.
The fund built with assessments insurers collect from policyholders would have the capacity to finance enough bonds to protect insurers from storm losses up to $17.4-billion. Statistically, such a storm is likely only once in 250 years, Nelson said.
The current residential joint underwriting association and Florida windstorm underwriting associations _ insurers of last resort for property owners unable to get coverage in the private market _ would be phased out.
The JUA ballooned into the state's second largest insurer with nearly 900,000 policyholders before lawmakers adopted incentives to private insurers to take over policies.
It has shrunk to fewer than 600,000 policies, in third place behind State Farm, which insures about 1-million Florida homeowners, and Allstate, which covers about 700,000.