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Reform Citizens insurance? Once more, with feeling

Orlando Sentinel
by Mike Thomas
April 20, 2011

You are underwriting insurance for 500 beachfront mansions worth a combined $2.6 billion. If a big hurricane hits Florida and blows them down, you will be taxed to put them back together. This is because the owners buy insurance from state-owned Citizens Property Insurance.

Citizens Property is proof that Republicans aren’t opposed to all entitlement programs. This one entails redistributing wealth from the center of the state to the coast.

Past attempts to correct this inequity have failed. But here we go again, this time with Gov. Rick Scott and state Sen. Alan Hays leading the charge.

Wish them luck.

Citizens is growing out of control.

The carrier is covering property worth $462 billion. We are on the hook for it because as Florida citizens, we own Citizens.

If it were a private carrier, it would have gone bankrupt long ago. Because it is not, it survives by our constant bailouts.

Gov. Charlie Crist made this bad situation much worse with his populist crusade to suppress insurance rates. He and Republican legislators froze rates charged by Citizens for three years.

Thereafter, they limited premium increases to 10 percent a year.

The result is that Citizens is woefully underfunded. To raise enough money to be fully solvent, Citizens would have to increase rates a whopping 56 percent. This means its customers are paying 44 cents on the dollar for their policies.

Consider this: Between 2004 and 2010, sinkhole claims have cost Citizens $867 million. Yet it has only collected $272 million in sinkhole premiums.

This is how the government conducts business.

Crist also politicized the Florida Office of Insurance Regulation, using it to suppress rates charged by private carriers. This created a market of highly leveraged companies, most of them losing money, with little cash on hand to pay claims. Many will blow away in the next big storm. Taxpayers will have to cover their losses as well.

This has caused a pent-up demand to raise rates, which hit with a vengeance last year.

There were 80 rate hikes. One in three companies obtained double-digit increases.

As a State Farm customer, I really got hammered.

Crist’s ballyhooed insurance reforms did nothing more than hold down rates long enough for him to run for the next political office. Now that he’s gone, the bill is coming due in huge lump sums. The very same insurance regulators who once rejected rates on Crist’s orders now are approving them in record numbers.

http://www.orlandosentinel.com/news/politics/os-mike-thomas-insurance-042011-20110420,0,614988.column

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Stormless stretch fuels complacency

Palm Beach Post
by Eliot Kleinberg
April 20, 2011

ATLANTA — Behind Bill Read, on a slide showing the tracks of hundreds of tropical storms and hurricanes through the decades, Florida was nearly hidden .

Last year was a blessing and a curse, the National Hurricane Center’s director told the opening session of the National Hurricane Conference.

Even though the season’s 19 named storms, tied for third-most of all time, marked up the 2010 map like strands of spaghetti, not one hurricane struck the U.S. mainland for the second consecutive year.

Why? A strong trough on the East Coast helped create an alley in the central Atlantic into which one storm after another shot north and stayed harmlessly off the North American coast.

Move things a little to the west, and “how much different the story would be,” Read told the annual conference of scientists, planners and emergency managers Tuesday .

Later, in a Palm Beach Post interview, Read said it’s too early – and well nigh impossible – to predict whether a similar high pressure system will sit in essentially the same place day after day, as it did for much of last year, or whether “somewhere in the middle of August, a slight weakening of it, will send a big hurricane right over Florida.”

Since Wilma struck in 2005, no hurricane has had a Florida landfall. In the same five years, no major hurricane of Category 3 or higher on the Saffir-Simpson scale, with top sustained winds of at least 111 mph, has struck the United States. That streak’s never gone six years, according to records that date to 1851.

After that long a stretch, surveys show one in three Floridians has no hurricane plan at all. And one state study said population turnover, short memories, contentedness and laziness all add up to potential “dire consequences” should a substantial hurricane threaten Palm Beach County and the Treasure Coast.

Federal Emergency Management Agency Administrator Craig Fugate called out people who have the means to prepare and just don’t, saying they harm more than themselves.

“It’s about responsibility. All of us that can have a responsibility to prepare to the best of our abilities so we don’t make the most vulnerable of our community get in line behind us,” he said.

And with the hurricane season’s June 1 start just six weeks away, he said, “Is the forecast for no hurricanes? We’ve got to get ready and the clock’s ticking.”

Colorado State University hurricane prognosticator William Gray closed the conference’s first day by noting there’s been a surge in major hurricanes, Category 3 or higher, in the past 16 years, but that, except for 2004-2005, no major storm has struck the East Coast.

“We’ve been lucky,” he said.

The hurricane region now is in a decades-long cycle of high hurricane activity. “If the future’s like the past, we probably have another 10, 15 years” of high numbers of major storms, Gray said.

For hurricane center director Read, “my number one concern is the same one I had last year”: Haiti.

“Virtually nothing has changed from last year as far as the condition of the people devastated by the (January 2010) earthquake. They’re still living under tarps,” Read said.

“If we have a major hurricane come at Haiti this year, that’s going to be my biggest gut check. I don’t know how that many people can be dealt with in a crisis of that magnitude,” he said.

http://www.palmbeachpost.com/storm/storm-news/stormless-stretch-fuels-complacency-1419068.html

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Storms Unlikely To Follow Last Year’s Patterns

Sarasota Herald Tribune
by Kate Spinner
April 19, 2011

ATLANTA – Count on a busy hurricane season, forecasters say, but not on the same fortunate weather that shunted last year’s storms — including four extremely powerful hurricanes — away from the U.S. coast.

Last year’s hurricane season was unusual. It was one of the busiest on record, with 12 hurricanes — five of them major — and seven tropical storms, but none caused significant widespread damage in the U.S.

The story could have been much different had the hurricanes followed a more typical weather pattern, said Bill Read, director of the National Hurricane Center, during a speech at the National Hurricane Conference on Tuesday.

Instead, large high pressure areas formed over the middle of the U.S. and over the Atlantic, steering most of the season’s storms — and all of the hurricanes — away from the east coast and the Gulf of Mexico states.

That unusual pattern is unlikely to be repeated this year.

“In the peak of summer it’s not unusual to get stuck in a pattern,” Read said in an interview after his speech. “But to have the same pattern back-to-back would be very unusual.”

Read and Federal Emergency Management Agency Administrator Craig Fugate urged people — including newly elected state governors and local leaders — to have emergency plans in place, as well as supplies of food, water and first aid in preparation for the six-month season that begins June 1.

In all, four major hurricanes, three lesser hurricanes and two tropical storms were steered away from the U.S. coast as they approached from the Atlantic in 2010. Two storms — Earl and Igor — struck Canada.

Different weather patterns pushed the season’s remaining 10 storms of the season, including one other major storm, into Mexico and the Caribbean. One tropical storm — Bonnie — passed briefly over Florida’s southern tip. Hermine caused severe flooding in Texas and Oklahoma.

Several meteorologists have predicted a very active season this year. Forecasts range from 15 to 16 named storms, including eight to nine hurricanes, three to five of which produce winds higher than 110 mph.

The forecasts are based on warmer-than-normal temperatures in the tropical Atlantic and weaker-than-normal upper level westerly winds, among several other factors. Warmer seas give storms more fuel and weaker upper level westerlies allow hurricanes an easier ride across the ocean.

Hurricane track forecasts are becoming more accurate, helping community leaders and residents to make better evacuation decisions.

But this year, many of those decision-makers will be new to the job of evacuating the pubic and have no experience with hurricanes, Fugate said. Florida, Alabama, South Carolina and Virginia all have new governors.

Fugate said elected leaders need to participate in drills now, to get practice making difficult evacuation decisions.

Evacuations, especially in tourist areas, cost communities money and sometimes put people in hospitals and nursing homes at risk.

But wrong decisions can have tragic consequences.

In Florida, Gov. Rick Scott put the Division of Emergency Management directly under his control, a move that signals support for emergency operations, said David Halstead, director of Emergency Management for Florida. He said the governor and his staff are participating in emergency planning for the hurricane season.

http://www.heraldtribune.com/article/20110419/ARTICLE/110419427?p=1&tc=pg

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Separating Myths From Facts on Florida’s Citizen Insurance

Insurance Journal
by Arturo F. Hoyo
April 19, 2011

Currently, Florida’s legislature is considering a proposal that will help restore health to Florida’s insurance market. As the proposal moves forward, it is worth separating the myths from the facts on the issue.

It is true that the state-backed Citizens Property Insurance is building reserves, however, this is mostly due to the fact that Florida hasn’t had a storm in five years and such accumulation is, therefore, due to luck, not profitable operations. It’s also true Citizens has $5.1 billion in surplus, however, it is also true Citizens’ probable maximum loss is four times that amount at just over $22 billion.

Some have argued that Citizens is currently more profitable than private carriers by pointing out that during the same storm-free seasons, private companies lost money. In reality, five have already failed since 2009. Unlike Citizens, private companies can’t assess those who don’t buy their policies and must cover almost all their wind exposure with expensive reinsurance; back-up coverage that Citizens opts to forego in favor of the assessments it is privileged to levy on everyone else. This is partially why the Florida Office of Insurance Regulation has had to approve more than 150 rate increases after five storm free seasons.

It is worth pointing out the irony of private companies competing with rates of Citizens that are 55 percent subsidized by assessments levied on the very carriers it is stealing the business from. Calling Citizens’ surplus “profit” is simply disingenuous. Remember, Citizens was building reserves before the 2004 and 2005 storms seasons too, but that huge shortfall is still being paid by the rest of Florida’s policyholders and will be for years to come.

Those paying are often some of Florida’s most vulnerable citizens, including mobile home renters, single mom’s living in apartments, students and others in subsidized housing. A complete picture would’ve showed that Citizens’ assessments “always” flow from a majority of households, many that can’t afford to own property, to a minority of homeowners, mostly wealthier people living on or near the coast.

Supporters of the current non-competitive, government monopoly of the state’s insurance market are entitled to their own opinions, but not their own facts. The goal of the reforms, known as SB-1714 and HB-1243, is to allow market forces to dictate Florida’s insurance market, not government bureaucrats.

Hoyo is chairman of the Florida Association of Insurance Agents and president of Coastal Insurance Group Inc. in Miami Springs.

http://www.insurancejournal.com/news/southeast/2011/04/19/195316.htm

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Let Consumers Decide Property Insurance

The Tampa Tribune
by Sen. Alan Hays
April 19, 2011

When it comes to insuring your home, who’s in the best position to choose what’s right for your family — you or the government?

I believe most Floridians would say it’s you, which is why I’m proud to sponsor this year’s version of the “Consumer Choice” property insurance bill in the Florida Senate.

Simply, the bill would allow consumers to decide for themselves whether they want to buy a new kind of market-based homeowners policy in which insurers could raise or lower premiums by up to 15 percent annually on a statewide basis without having to go through full state regulatory review.

What’s the rationale behind this?

First and foremost, Floridians want and need more good choices for insuring their homes in the private market. Consumers are savvy enough to determine what they’re willing to pay to protect their most valuable asset.

Under this bill, there are no surprises. Homeowners would sign an acknowledgment that they’re buying a Consumer Choice policy because they want one and receive a comparison quote showing what a similar policy would cost in government-run Citizens Property Insurance Corp.

If the homeowner thinks the Consumer Choice policy is a good deal, they can buy one. If not, they can keep shopping.

By allowing private insurers some limited rating flexibility, we can help spark competition that will strengthen insurers and stabilize rates over time.

Consumer Choice policies will also help encourage financially strong, private insurers to return to Florida and start writing homeowners policies again.

Floridians need more homeowners-insurance choices that are based on private capital instead of government entities with limited capital to pay claims.

We must confront the fact that Citizens and the Florida Hurricane Catastrophe Fund are too large and carry billions of dollars in liabilities that they don’t have the cash or bonds to pay for if a major hurricane hits.

Since 2005, Floridians have paid $6 billion in “hidden hurricane taxes” to cover losses in these two bloated government entities. There are estimates that every Florida family could be hit with as much as $14,000 in these taxes if a bad hurricane scenario unfolds.

Two years ago, my colleagues Sen. Mike Bennett of Bradenton and Rep. Bill Proctor of St. Augustine introduced a similar consumer choice bill. It won support from more than 80 percent of the Legislature but was vetoed by then-Gov. Charlie Crist, whose populist posture was to bash insurers while the market steadily deteriorated. The bill was pulled again last year under threat of another veto.

Recently, state regulators have received several requests from private insurers to raise rates by 25 percent or more on a statewide average basis.

So in a sense, the Consumer Choice bill can act as a 15 percent cap on rate swings from one year to the next. Under the proposal, no individual homeowners’ policy could increase by more than twice that cap amount annually.

Additionally, Citizens is currently required to raise its rates 10 percent annually and may be forced to raise its rates by 25 percent each year until its premiums reflect actual risk.

If the state-run insurer can be granted this kind of authority to raise rates annually, why not try giving private insurers some flexibility on rating?

The Florida House has a similar bill going through the legislative process. That bill has had some hang-ups, but I hope my colleagues will see the pro-consumer components of the bill, including the opportunity to re-stimulate the private insurance market leading to more choices for consumers.

I encourage my colleagues to support these good reforms.

All in all, it’s time to put you — the consumer — in charge of deciding what you want to pay for your homeowners insurance. If you agree, please support the Consumer Choice bill, Senate Bill 1330.

State Sen. Alan Hays, R-Umatilla, represents District 20, which includes most of Lake County and parts of Marion, Sumter, Volusia and Seminole counties.

http://www2.tbo.com/content/2011/apr/19/PMEOPINO2-let-consumers-decide-property-insurance/

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Sunset for Citizens

The Tampa Tribune
Editorial
April 18, 2011

Citizens Property Insurance Corp., a state-run company, is the largest insurer of homes and other property in Florida at 1.3 million policies in 2010. What was supposed to be the insurer of last resort in the Sunshine State now covers $457 billion worth of Florida property.

It is a behemoth that competes for coverage with other private insurance companies by writing policies using artificially low rates. In some coastal areas, where buildings would be leveled by a once-in-a-century hurricane, homeowners may be paying 35 percent to 65 percent below rates based on the actual risk.

And if a monster storm should hit the coast, every home or business owner, every car owner – almost anyone insured – could see billions in surcharges added to their premiums. In fact, it has already happened, as we continue to pay hurricane assessments from the eight storms of 2004 and 2005 to cover the costs of Citizens’ policyholders.

For 2011, Citizens has a claims-paying capacity of $14.7 billion. Its probable maximum loss in a 1-in-100 year event is $22.2 billion.

Which raises the question of whether the state should be in the insurance business to begin with. We think not.

Lawmakers should move toward shutting Citizens’ doors. We understand the company formed because property owners couldn’t find insurance. We know private carriers have been reluctant to write new coverage in recent years.

But one thing former Gov. Charlie Crist was right about is that insurance companies don’t want to lose lucrative Florida customers, and this market is too valuable.

And at the same time, the market is perilous — perilous for carriers insuring property located on this big spit of land surrounded by water and for homeowners, who have seen property values fall even as the costs to live here rises.

So why not give Citizens policyholders a timeframe in which to find new coverage, say three years, then sunset the company?

But for now, something has to be done to grow the marketplace of insurance carriers and shrink Citizens so the state can meet its obligations in the event of a major hurricane. Bills are moving in both chambers of the Legislature that would increase the cost of coverage to Citizens customers to reflect actual risk and slow the growth of the company.

“We now have the chance to get Citizens back to the market of last resort, which is what Citizens was intended to be to begin with,” said Rep. Jim Boyd, R-Bradenton, the sponsor of HB 1243. Appearing before the House insurance and banking subcommittee, he also said, “There’s a big opportunity to get private capital back.”

Let’s hope so.

Among the proposals is to allow Citizens to increase premiums by up to 25 percent a year on single policies — a blow to the consumer but a move toward fiscal sanity.

Other proposals would tighten the eligibility requirements. A new Citizens applicant must prove the cost with any other carrier would be 25 percent higher. By 2015 coverage would be limited to those who can find no other insurance.

And the bills would, over the next five years, eliminate coverage of homes valued at more than $500,000. Importantly, Citizens would no longer provide coverage for new structures within the Coastal Construction Control Line.

The bills also address sinkhole coverage, of which Citizens is the largest writer, but that is an editorial for another day. For now, let’s focus on the big picture: The state needs to get out of the property-insurance business.

It’s true that the increases called for in the various bills will be hard on some property owners. But that does not mean the bills are anti-consumer. If something is not done, all ratepayers would be on the hook for any debt that the state insurers — Citizens and the Florida Hurricane Catastrophe Fund — incur. These assessments would make it more expensive for everyone living and doing business in Florida.

http://www2.tbo.com/content/2011/apr/17/PVWOPINO1-sunset-for-citizens/

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Hurricanes worsen; is a warmer Earth to blame?

Philadelphia Inquirer
by Anthony R. Wood
April 18, 2011

The simmering issue of whether a warmer world brews more-destructive hurricanes is a powerful one, not just for coastal interests but for every U.S. taxpayer from Philadelphia to Honolulu.

Look for the debate to heat up this year, as the latest outlooks are calling for another busy and potentially destructive hurricane season, which will begin June 1.

Without question, hurricanes have become more devastating as the world has become warmer during the last 30 years.

But are the trends related?

Human activity indisputably is a factor – for evidence, see all that nature-taunting coastal building. The greenhouse case, however, remains arguable.

A word on the warming: It’s been real. Global temperatures have been above long-term averages every month since February 1985, according to National Climate Data Center records dating to 1880. They are just under a degree Fahrenheit higher now than they were when the trend started.

As for the hurricanes, a warming trend also has taken hold in the storm-inciting waters of the tropics, and a 2008 study found rather convincingly that peak winds of the strongest hurricanes have intensified since 1981.

So have the costs.

In 1989, Hugo slammed into South Carolina and arced all the way to Lake Erie, causing $7 billion in damage, three times more than any U.S. hurricane before it. The cataclysmic Katrina, 16 years later, would become the country’s first $80 billion storm.

So shouldn’t that seal the greenhouse case? Not quite.

The 2008 paper documenting stronger peak winds in the most-potent storms relied on global satellite data available only as far back as 1981.

The changes did track neatly with increases in sea-surface temperatures – SSTs – and the paper might have been the first to establish the SST-wind connection. But it did not address the question of whether those increases were cyclical or something permanent.

“We did not examine what might be causing the uptick in SST,” said James Elsner, a hurricane specialist at Florida State University, who led the study.

As for those staggering hurricane costs, they clearly speak to the amazing building boom along the coasts since 1970. Much of it occurred before 1995, a general lull for hurricane activity in the Atlantic basin, which includes the Gulf of Mexico and the Caribbean Sea. Active and lull periods have alternated in cycles of 25 years or more, and an active era got cooking in 1995. Since then, it has been hurricane rush hour in the Atlantic.

The hurricanes have encountered barricades of buildings along the Southeast coast and Gulf Coast.

To look at the consequences of development, consider Katrina. Tweaking for 2010 dollars, Katrina resulted in an estimated $91.4 billion in insured and property losses.

But if Katrina had hit the same areas in 1970, the damage would have been closer to $40 billion in today’s dollars, according to an analysis by Roger Pielke Jr. of the University of Colorado.

Adjusting for inflation and current levels of building, Pielke has estimated what storms would cost if they arrived today, and his tables are oft-cited. On the Pielke list, Katrina is a distant third behind the Great Miami Hurricane of 1926 and the Galveston disaster of 1900.

The horrors of Katrina extracted staggering costs, leaving U.S. taxpayers with a $40 billion disaster-aid bill, plus $18 billion in federal flood-insurance losses. The total comes to better than $500 per household.

Disaster aid wells from the best impulses of mankind, said Pielke’s colleague William Travis, director of the university’s Center for Science and Technology Policy Research, but “we’re digging ourselves a hole. How are we going to get out?”

Hurricanes remain the biggest-ticket item for disaster expenses – far bigger than tornadoes, earthquakes, and other mayhem.

At the end of the 2010 hurricane season, Federal Emergency Management Agency figures showed that more than 80 percent of the $65 billion in disaster costs since 2005 had been due to hurricanes.

The major hurricanes that make landfall in the United States are the ones that roll up the disaster costs, as they drag waves landward and cause widespread flooding.

That is why the outlooks issued this month by Accu-Weather Inc. and Colorado State University researchers William Gray and Philip Klotzbach are particularly worrisome.

The team forecast 16 named storms, with winds 39 m.p.h. or more, including eight hurricanes, with winds at least 74 m.p.h. Accu-Weather predicted 15 named storms, including eight hurricanes. The long-term averages are 10 named storms and six hurricanes.

Taxpayers almost certainly will spend more on disaster assistance than they did in 2010. Although 12 hurricanes formed last year, not a nickel of disaster money went toward hurricane-diasaster assistance. Never before had so many formed without a single U.S. landfall.

That was record luck and, as far as we know, had nothing to do with global warming.

http://www.philly.com/philly/insights/in_the_know/120045799.html?viewAll=y

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Living on Borrowed Time

Crestview News Bulletin
by Eli Lehrer
April 17, 2011

Sometime soon – maybe even this year – the run of good luck that has brought Florida five consecutive hurricane-free years will end. When it does, the state could face a fiscal crisis that would make this year’s $3.6 billion budget gap appear trivial. If legislators do not quickly enact reforms that cut the size of the Florida Citizens Property Insurance Corporation, reform the state’s Hurricane Catastrophe Fund, and improve the safety of the state’s built environment, quite simply, they will not have done their job.

A look at the facts about Citizens and the Cat Fund shows just how serious the situation has become. Rather than leaving the risk to private insurance companies, Citizens, a state government agency that sells property insurance to about a quarter of all Floridians, could force taxpayers to shell out billions for damage to homes all across the state. And the state-run Hurricane Catastrophe Fund, which sells discount rate reinsurance (insurance for insurance companies) to Citizens and all of the states’ private insurers, is an even worse mess. It has about $6 billion in hard assets to pay for claims that, in a particularly bad year, could theoretically top $24 billion.

To pay off these bills, the Cat Fund would have to issue at least $18 billion in bonds and then collect about $6,000 from each family of four to pay them off. Since there’s no practical way for the state to collect this much revenue under current laws, Florida would probably have to either impose a state income tax or seek some sort of bankruptcy-like protection in order to stay afloat.

Bad as all this sounds, change is possible. In fact, a few reasonably simple pieces of legislation could fix the system without causing major disruptions for Florida residents.

Proposals that shrink Citizens should come first. Rather than abolishing Citizens immediately, as desired by some in the insurance industry, the Legislature should take a middle course and work to shrink Citizens 60 percent over four years. A gradual reduction in Citizens’ size and scope would significantly cut the liability imposed on taxpayers while still providing “last resort” coverage for high-risk homeowners in the Keys and elsewhere. Louisiana, which weathered a disaster far worse than Florida’s, successfully shrunk its own version of Citizens by a similar amount over the past four years – Florida can do the same.

Changes to the Cat Fund, likewise, would make the state more secure against hurricanes while simultaneously removing liabilities from taxpayers. Instead of using the Cat Fund to displace private reinsurance, the Legislature should shrink the Cat Fund’s overall size and ensure it has a mix of cash and private market risk-transfer instruments (bonds and reinsurance) to pay any potential claims.

Finally, the Legislature should work to make Florida’s homeowners safer. While significant new spending isn’t practical, creative use of existing federal grant dollars, a revival of the hurricane mitigation sales tax holiday (last held in 2007), and a prohibition of state subsidies for building in environmentally-sensitive, hurricane-prone areas would all help reduce insurance rates while making residents safer.

In the end, Florida must realize that poorly conceived regulations and market interventions sit at the root of its problems with property insurance. The state cannot avoid storms, and one way or another its residents will pay the costs implicit in living on a low-lying peninsula in the middle of a hurricane-zone.

Citizens, competing directly with private insurers, and the Cat Fund, making promises that it cannot keep, have made it nearly impossible for nationally-known private insurers to write new policies in Florida. This has left taxpayers with a huge tab. If state leaders reform Citizens, shrink the Cat Fund and make its residents safer, Florida can and should expect private firms to return and relieve taxpayers of the enormous risks implicit in retaining the current, broken property insurance system.

Eli Lehrer is an adjunct scholar of the James Madison Institute, a non-partisan policy research center based in Tallahassee, and vice president of the Heartland Institute.

http://www.crestviewbulletin.com/news/letter-13916-living-sometime.html

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Democrats fight sweeping property insurance bill

SunSentinel.com
by Julie Patel
April 14, 2011

Broad legislation to allow insurers to withhold part of a claims payment until repairs are made and allow certain rate hikes was cleared by a final House committee Thursday despite fierce opposition from Democrats on the panel.

The bill, HB 803, has more than a dozen provisions, including some that would:

Allow home insurers to hold back part of a claims payment before repairs are made;

Limit the time homeowners have to make any kind of claim to four years instead of five;

Allow an insurer to drop full sinkhole coverage on everything but the main building of a property and requires a property inspection before the insurer provides sinkhole coverage;

Bar regulators from rejecting rate hikes due to higher costs for advertising and agent commissions;

Allow insurers to increase policyholders’ premiums without full oversight from regulators by up to 15 percent a year – as opposed to the 10 percent allowed by state law – to pay for reinsurance, or catastrophe insurance for insurers;

Create new limits on fees charged by public adjusters and how they advertise; and

Scrap a 2009 rule requiring insurers to report by the end of the month information for all sinkhole claims closed between 2005 and 2010.

The committee approved a change proposed by Rep. Peter Nehr, R-Palm Harbor, to extend by one year a state law that expired recently requiring insurers to get approval for rate hike before implementing them, instead of issuing refunds later if the increase is rejected.

The committee rejected several other proposals back by Democrats to change or water down the bill.

For instance, Rep. Evan Jenne, D-Dania Beach, proposed deleting a provision in state law that exempts regulation for some so-called managing general agents, companies hired by insurers to handle their day-to-day operations. Some insurers say they’re losing money in Florida, but regulators have said they can’t track the flow of money from some insurers to their sister or parent companies that act as their MGAs, administering policies and processing claims.

“The money is being shuffled around,” Jenne said. “There is no regulation whatsoever protecting yourselves or your constituents when it comes to [most] MGAs…This is one of the main problems exacerbating our property insurance situation.”

But the bill sponsor, Rep. John Wood, R-Winter Haven, said the regulators have all the tools they need and the state won’t be able to attract insurers to the state if it keeps creating regulations that “attack the insurance industry and its ability to function.”

Insurance industry representatives have said profits that can be earned through MGAs are needed to draw and keep investors supporting Florida-based insurers, which fill the gap left by national insurers that scaled back from the state.

HB 803 was approved by a 11 to 7 vote. All Democrats on the committee and all but one South Floridian, Rep. Jeanette Nunez, R-Miami, voted against it.

It will now go to the full House. The Senate version, SB 408, cleared four committees and also awaits a full chamber vote.

In the final weeks of the annual legislative session, lawmakers will work to come to an agreement on a final version of the legislation, which would then go to the governor’s desk for a signature to become law.

Two other bills with provisions allowing rate hikes are up for votes tomorrow.

Consumers can weigh in on the bills by contacting their legislators.

http://weblogs.sun-sentinel.com/business/realestate/housekeys/blog/2011/04/final_stretch_for_sweeping_pro.html

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Florida Property Insurance: No Laughing Matter

TheLedger.com
Editorial
April 13, 2011

Citizens Property Insurance has so many critics that the government-sponsored insurer is the butt of jokes in the Florida Legislature.

During a recent hearing, for example, state Senate Budget Committee Chairman J.D. Alexander, R-Lake Wales, got laughs from fellow committee members when he proposed an amendment to change Citizens’ name to the “Taxpayer Funded Property Insurance Corp.”

Legislators can be excused for getting a little slaphappy during their annual session, but what was so funny about Alexander’s amendment?

What’s more, why are so many legislators — including proponents of bills that would further limit Citizens’ reach and substantially raise private-sector premiums — treating property insurance so cavalierly?

Yes, Citizens — a nonprofit, tax-exempt government corporation — has been plagued by problems since its in inception and, despite the acquisition of $2.4 billion from the sale of bonds last week, some estimates suggest the insurer will require a $14 billion bailout if a catastrophic storm strikes a heavily populated portion of Florida.

And, yes, in a perfect world, property owners would have access to affordable insurance provided by a solvent, stable and well-capitalized private-sector market.

But Citizens and its predecessors were created in response to the failure of 11 private insurance companies, in the aftermath of Hurricane Andrew (1992) and the subsequent exodus of insurers. The state had to use public funds to pay claims filed with the failed insurers.

Private insurers continue to leave the state, and policy cancellations are routine. The market was in crisis again after the 2004 and 2005 hurricane seasons.

It’s understandable that private-sector insurers and their lobbyists resent the size of Citizens’ client base — the government corporation has 1.3 million policyholders, about one-third of the market — and the state’s efforts to keep its premiums under control.

It’s obvious, too, that Florida’s vulnerability to hurricanes and dense coastal development create enormous exposure for insurers. Higher premiums can be justified, so long as they are used to keep private companies solvent and enable them to pay claims.

Bills advancing in the Legislature would place constraints on Citizens, but lift caps on private-policy premiums and significantly reduce the exposure of insurers.

Proponents contend that the legislation will stimulate the private market and lead to more competition and, thus, better insurance.

Let’s hope they’re right. History casts doubt on their optimism. Despite the potential to charge higher rates in the future, many of the most robust insurers have continued to cancel policies and reduce their exposure in Florida.

The legislation provides too few assurances that rate hikes will translate into competitive pricing, greater availability of coverage and an increase in the number of companies willing to write policies and able to pay claims.

http://www.theledger.com/article/20110413/EDIT01/104135000/1358/news06?p=2&tc=pg

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