the Current
By Gray Rohrer
January 24, 2012
A bill to allow private insurance companies more time to recoup losses from customers in the aftermath of a storm passed swiftly through a House panel Tuesday. Under HB 1127, nearly all regular assessments on insurance policies after a catastrophic storm — which are due to state-backed Citizens Property Insurance Corp. 90 days after they are assessed — are transferred to emergency assessments, which can be recouped over a longer period of time.
Supporters of the bill say it will make the Florida property insurance market more attractive to out-of-state capital and reduce the short-term exposure of the private market. But another bill, HB 833 — designed to reduce back-door assessments on policyholders by reducing the amount of reinsurance backed by the state, is drawing complaints from Citizens and private insurers.
They contend that because the bill shrinks the size of the Florida Hurricane Catastrophe Fund, or Cat Fund, and increases the amount of co-pays for private insurers, it will force them to raise their premiums. That means Citizens, whose rate increases are capped at 10 percent annually, would be more attractive to consumers, the exact opposite of the intent of Gov. Rick Scott and other elected officials seeking to bring more private insurance capital to Florida.
Both HB 1127 and HB 833 were discussed in a workshop meeting of the House Insurance and Banking Subcommittee last week. Whereas HB 1127 passed through the committee Tuesday with two negative votes, HB 833 did not come up for a vote.
Rep. Bill Hager, R-Boca Raton, who is sponsoring the bill, said he doesn’t agree with the contention of some private insurance companies that say Citizens must be reformed along with the Cat Fund, but is willing to make changes to the legislation. Regardless of any potential amendments, Hager said, the bill should move forward because the Cat Fund faces a potential $3.2 billion shortfall if a catastrophic storm hit the state.
“The Cat Fund bill can, in fact, move forward with or without changes to Citizens,” Hager said. “I think I’ll come forward with modifications of the bill. I may have something that deals with a piece of Citizens, but I think it’s wrong for us to wait, particularly with the start of hurricane season five months away.”
Citizens itself is also critical of HB 833. In a narrow vote last month, its Board of Governors voted to draft a letter noting its concern.
“We have concerns about enacting into law reductions to the size of the FHCF and the potential impact it could have on Citizens’ policy count as the result of reduced depopulation activity,” the letter reads in part.
Although there has been comparatively little talk in the Senate about the potential Cat Fund shortfall, Sen. JD Alexander, R-Lake Wales, sponsor of the companion SB 1372, said he won’t wait for other reforms to Citizens before moving forward.
“We’ve been talking about some possible changes to it to accommodate some of those concerns. My ultimate goal is to reduce the risk. Quite frankly, when you’re going in the wrong direction, any step in the right direction is helpful,” Alexander said.
Reporter Gray Rohrer can be reached at grohrer@thefloridacurrent.com.
