Lawmakers on Friday agreed to let Citizens Insurance premiums rise by a maximum of 10 percent each year - capping off an intense week of lobbying and negotiations between the House and Senate.
The last day of the regular session also saw passage of legislation affecting private property insurance rates and companies that offer insurance of last resort to high-risk businesses and homeowners.
The Citizens premium legislation (HB1495/SB1950) sets a so-called "glide path" of gradual annual premium increases aimed at reducing Florida's financial risk by boosting cash assets and decreasing the liability in Florida's Hurricane Catastrophe Fund.
"Right now we're the Titanic heading into an iceberg," said House sponsor Rep. Bryan Nelson, R-Apopka. "This glide path is starting to turn this ship in the right direction."
The fund is roughly $13 billion short of what would be needed to cover devastating property damage likely to come from a major hurricane, thanks in part to the global recession and tightened credit markets.
By gradually letting Citizens' rates rise until they reach sound levels, lawmakers hope the additional revenue will boost the state's cash reserves and reduce the need for bonds.
Citizens' rates have been frozen since 2007. Had lawmakers not passed Friday's glide path bill, Citizens likely would have sought rate hikes of 40 to 55 percent - the level Citizens officials say is really needed to cover potential storm losses.
"Citizens Insurance has us on the hook for a number of billions of dollars that would scare anybody," said bill supporter Rep. Ed Hooper, R-Clearwater. "To keep the rates where they are is actuarial suicide."
The House voted 80-35 for the measure, a compromise with the Senate that had called for 5 percent annual hikes. Later Friday, the Senate voted 32-6 to agree with the House. The House had proposed 20 percent increases per year for any single policyholder, but Gov. Charlie Crist preferred a smaller increase.
The lawmakers opposed to the bill are concerned about raising rates for Floridians who already are struggling with the economic downturn.
"Now is not the right time to put more of a burden on citizens' pocketbooks," said Rep. Evan Jenne, D-Fort Lauderdale. "I don't disagree with the premise. I disagree with the timing of this."
The bill also gradually gets Florida out of the business of providing private insurance companies with cheap reinsurance (basically insurance that insurers buy to protect themselves against losses).
That reinsurance - known as the TICL, or temporary increase in coverage limit - has the state on the hook for $12 billion right now if a big storm hits. State officials admit they do not have that money on hand.
Also on Friday, the Legislature approved a bill (SB2036/HB1171) aimed at luring large private insurers like State Farm back to Florida by allowing them to raise rates without approval from the Office of Insurance Regulation. The Senate Friday voted 29-9 for the House bill.
Those companies would be required to disclose clearly and in writing, the fact that their higher rates are not regulated by OIR.
Supporters call it the "consumer choice," bill, because they say some property owners would prefer to pay more for an established company with significant assets like State Farm.
But lawmakers and lobbyists concede the governor - long opposed to large rate hikes, and no friend of State Farm - is likely to veto it.
Also Friday, the Legislature approved a measure (SB 1894) maintaining the deregulated system for insurers, known as "surplus lines," that serve high-risk businesses such as liquor stores and hospitals and some residences.
Staff writer Steve Bousquet contributed to this report. Shannon Colavecchio can be reached at scolavecchio@sptimes.com or (850) 224-7263.