Don Brown

Sunshine News
by Gary Rohrer
April 12, 2011

Private insurers began the 2011 legislative session with high hopes for a slate of bills to move through the lawmaking process, but while the Legislature has moved relatively quickly on the budget process and a merit pay bill for teachers, insurance reform measures have yet to see a floor vote.

Citizens Property Insurance, the state-run homeowners’ property insurer, is the source of most of the ire of the private insurers, who would like to see more actuarial-based pricing from a competitor they say has an unfair competitive advantage because it is not subject to the same standards for reserves as private companies.

“We’re looking at an insurance company that, if it were a private company, would have been shut down by the OIR (Office of Insurance Regulation). At the worst, the directors of that company and the board of that company would have been arrested for fraud and thrown in jail,” said Sen. Alan Hays, R-Umatilla.

Hays is sponsoring Senate Bill 1714, which limits the value of homes that can be insured under Citizens and bars applicants for Citizens from obtaining insurance from them if private insurers offer a policy within 25 percent of the cost of the state-run insurer.

The bill narrowly made it through its first committee stop in a 6-4 vote, and is scheduled for a second committee meeting this week.

Getting Citizens back on a level competitive playing field is seen as the key to attracting more private insurers into the Florida market, but Hays says there is also an incentive for taxpayers to get Citizens in check. A destructive hurricane could leave Florida with a hefty debt burden.

“If Citizens comes up with this one-in-100-year storm, it would mean $14 billion to the taxpayers of Florida,” Hays said.

A similar House bill has made it through two committees.

Further along in the legislative process is Senate Bill 408, a bill that eliminates the requirement for insurers to offer sinkhole coverage and reduces the surplus requirement for private insurance companies, which has made it through three committees and is ready for a vote on the Senate floor.

Sinkhole claims have been a thorn in the side of Florida insurers in recent years, with claims tripling in the past three years. Many of those claims often involve a simple crack in the pavement or driveway.

Sen. Garrett Richter, R-Naples, sponsor of SB 408, pushed a similar bill last year that made it through the Legislature only to be vetoed by then-Gov. Charlie Crist.

Even though the reforms pushed by the insurance industry haven’t moved as quickly as other large-scale reforms, like bills dealing with education and pension reform, there are still 25 days left in the legislative session.

“We remain hopeful that some of these bills will cross the finish line,” said Kyle Ulrich, senior vice president of the Florida Association of Insurance Agents.

http://www.sunshinestatenews.com/story/halfway-through-session-private-insurers-still-hopeful-reforms

The Gainesville Sun
by Charles Lee
April 11, 2011

As the Director of Advocacy for the Audubon of Florida, I read with great interest the opinion piece “Manley Fuller: End Florida’s hurricane insurance subsidies” (March 8). The Audubon of Florida is a wildlife conservation organization that works tirelessly to protect the water and wildlife habitat throughout our great state. Because of our work, I hope the Florida Legislature takes notice of the important points made by Fuller and spends this legislative session reforming both Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund.

As Fuller pointed out in his piece, reforming these two actuarially unsound, state-run entities is imperative to ending the practice of subsidizing irresponsible coastal development in the most hazardous areas of the state. Our organization stands in support with a strong belief that not taking the appropriate action “threatens the remaining unblemished beaches, coastal environments and barrier islands that are central to Florida’s tourism and economic development.”

We look to our elected officials to make these necessary changes to better protect the Sunshine State.

Charles Lee
Audubon of Florida
Tallahassee

http://www.gainesville.com/article/20110411/NEWS/110419915/1109/sports?Title=Charles-Lee-Time-to-reform-Florida-s-hurricane-insurance-

Orlando Business Journal
by Bill Orben
April 11, 2011

I decided today to listen in on a conference call with the Florida Association of Insurance Agents to find out what’s the latest with the Legislature’s efforts to reform Citizens Property Insurance Corp.
The gist of what was said is this: The state is working to make people who decided to buy property in hurricane-prone areas, such as along the coast, pay more of their fair share to insure it. After all, it was their decision to have a home there.

And really rich people who own really expensive homes won’t be able to get uber-cheap coverage at the taxpayers’ expense anymore. If your homeowners insurance increased by more than 10 percent — the cap on Citizens Property Insurance Corp. rates — that’s something you’ll likely appreciate.

Citizens Property Insurance Corp. policyholders would pay 15 percent to 25 percent more for insurance next year under proposed state laws aimed at reforming the state-run insurer.
In addition, Citizens could cover only properties valued at $1 million or less starting next year. By 2016, Citizens would insure only properties valued at $500,000 or less.

It’s a bitter pill for Citizens’ 1.3 million policyholders, but it’s also one they likely will swallow.
House Bill 1243 allows for a 15 percent increase and Senate Bill 1714 would increase rates by 20 percent to 25 percent. The House and Senate are expected to pass the two bills, with a compromise rate increase likely will be 15 percent to 20 percent. And Gov. Rick Scott is expected to sign the compromise bill into law.

The aim of the two bills is to return Citizens to being the state’s insurer of last resort, enable it to charge enough premiums to actually cover claims and end its competition with other insurers.
Because of its lower premiums, Citizens has become the largest property insurer in Florida and one of the 50 largest in the nation. Right now, if Citizens can’t cover its claims, the state simply would levy an assessment on other property and vehicle insurance policies to make up the difference.

Of the 1.3 million insured by Citizens, 70,000 in the last year got quotes from other insurers but signed on with Citizens because it was cheaper, said Sen. Alan Hays, R-Umatilla, who introduced the bill in the Senate and is stumping for its passage.

The 500 most expensive homes covered by Citizens — valued from $3.5 million to $26 million — represent $2.6 billion in exposure to state taxpayers, Hays said.

“We have to stop this,” said Hays during the insurance group’s conference call, speaking of the risk faced by Citizens.

The backlash from proposed Citizens’ rate increases and lowering the values of properties eligible for coverage likely will be fierce. However, those howls of discontent pale in comparison to the screams of taxpayers angry about covering the potential losses of Citizens’ policy holders.

http://www.bizjournals.com/orlando/blog/2011/04/will-florida-voters-swallow-this.html

Orlando Sentinel
by Mark Schlueb
April 10, 2011

The roofs were repaired long ago and the uprooted trees are just a memory, but nearly seven years after the disastrous 2004 hurricane season, Orlando City Hall is still trying to collect some cash from FEMA.

Long after hurricanes Charley, Frances and Jeanne blew through Florida in quick succession, officials with the Federal Emergency Management Agency and the state Department of Emergency Management continue to comb through invoices from truckloads of fallen tree limbs and stump-removal crews, trying to determine how much Orlando should be reimbursed for its cleanup expenses.

“If asked in 2004 how long I would expect the reimbursement process to take, I would not have said seven years,” Orlando Mayor Buddy Dyer said.

Over the years, FEMA has paid most reimbursement claims from cities, counties and nonprofit agencies for cleanup, rebuilding and other expenses related to Florida’s unprecedented hurricane season.

There were nearly 1,000 applicants — from a Kissimmee charter school and the Seminole Tribe to the University of Florida and Orange County. Most filed multiple claims for the three hurricanes — 23,187 in all. Those claims totaled $1.88 billion, of which $1.82 billion has been paid.

Palm Beach County, hammered by both Frances and Jeanne in just three weeks, collected the most: $81.4 million. Orange County wasn’t far behind, at $70.5 million.

But $18.1 million remains unpaid. According to data obtained from the state, FEMA still owes at least $10,000 to more than 50 applicants. Some are owed much more: Fort Pierce is still waiting for the biggest check, at $4.3 million.

That doesn’t include applicants such as Orlando that contend they are owed more than FEMA thinks they are due.

In Orlando’s case, FEMA has already paid $29.6 million during the past seven years. But Orlando officials are still trying to get the agency to pay another $115,000 in expenses that FEMA previously rejected.

Officials with FEMA and the state argue that the reimbursement process is a long one because it takes time to carefully review thousands of claims that involve so much federal money.

“It all comes back to making sure federal dollars are only used for eligible disaster-related expenses,” FEMA spokesman Josh Wilson said.

Still, officials in Orlando and elsewhere say the fact that it’s taking so long shows that FEMA’s system is broken.
Dave Metzger, who has been shepherding Orlando’s efforts to obtain reimbursement, remembers attending a briefing with officials from Miami-Dade County a few days after Hurricane Charley hit.

“This individual said, ‘It’ll be seven or eight years until you get this completed,'” Metzger said. “I remember thinking, ‘Boy, you guys must be very inefficient.’ But he was right.”

Metzger, in fact, was supposed to be enjoying retirement by the time the hurricanes blew through. He’d been the city’s public works director, but turned in his retirement papers a few months before the storms.
nstead, the mayor asked Metzger to stay on to handle the hurricane reimbursement process, and he was given a one-year consulting contract. That wouldn’t be nearly enough. Metzger’s contract has been renewed seven times, most recently last month. He’s been paid $594,000 since 2004.

“It’s been taking so long — that’s been the aggravating thing about it,” said Metzger, now 69.

Orlando had never seen anything like the trio of hurricanes in the summer of 2004.

For 12 weeks, fleets of trucks loaded down with debris from downed trees and limbs became a common site around Central Florida. Orlando’s contractors collected more than a million cubic yards of debris and trucked it to four temporary disposal sites. It was eventually ground into wood chips; some went to the landfill, some to a waste-to-energy power plant in South Florida, and some was shipped to Italy to be made into pressed board.

Collecting the debris was a monstrous undertaking. But documenting the work was just as daunting. FEMA guidelines required the city to record the street where each truckload of debris was collected.

And though all the trees and limbs from Charley weren’t picked up before Frances struck, and Jeanne followed before all the debris from Frances was collected, FEMA also required applicants to assign each truck’s debris to the correct storm.

For Orlando alone, that meant reviewing and recording more than 36,000 load tickets. For each reimbursement request, FEMA requires detailed worksheets that some cities and counties have complained are too cumbersome. Orlando filed 400 such worksheets, of which five remain unresolved.

Initially, FEMA denied about half the city’s claims for the cost of removing tree stumps. After two appeals, the agency paid more, but not all, of those costs.
State and federal officials say many of the outstanding claims still haven’t been paid because applicants had to wait for settlements from their insurance carriers, or because the repair work itself has taken a long time. The agencies also have to ensure taxpayer money isn’t spent to clean up private roads.

“The documentation needed to close out a debris project worksheet is required to protect taxpayers,” Wilson said.

Even so, some applicants complain that FEMA’s burdensome red tape is at fault. In contrast, the Federal Highway Administration, which reimbursed locals for some cleanup costs on federal and state roads, had a much simpler and faster process, Metzger said.

So far, FEMA has paid Winter Park about $11.5 million. Winter Park officials believe they are owed more than $1 million more, but FEMA has only approved about $181,000 of that.

“It has been extremely frustrating,” Winter Park spokeswoman Clarissa Howard said. “It’s been since 2004. We wish they would assign more people to this so we could get reimbursed.”

Staff writer Scott Powers contributed to this report. mschlueb@tribune.com or 407-420-5417.

To find out what your city or county received in FEMA and state money, search our database at OrlandoSentinel.com/hurricanedamage

http://articles.orlandosentinel.com/2011-04-10/news/os-hurricane-cleanup-fema-20110410_1_fema-cash-fema-spokesman-josh-wilson-frances-and-jeanne

The Florida Times Union
by Abel Harding
April 10, 2011
Property insurance reform is coming to Florida. Again.

Unlike the changes pushed through a willing GOP Legislature by then-Gov. Charlie Crist in 2007, these reforms are largely industry-friendly.

With differing versions working through the House and Senate, the end result remains unclear. Two things appear certain, however: taxpayer-backed Citizens Property Insurance, whose 1.3 million policyholders make it the state’s largest, appears poised to shrink dramatically and rates will rise — by at least 15 percent.

Industry experts say those changes are necessary to move Florida back to a free-market system, where insurance costs are based on risk. They argue that, in effect, taxpayers have subsidized construction in environmentally sensitive and high-risk coastal areas that private insurers are unwilling to cover. For the market to stabilize, if new construction can’t obtain coverage in the private market, there should be no assumption taxpayers will pick up the tab.

“It’s the heart of the issue,” said Don Brown, a former state representative and long-time insurance agent in DeFuniak Springs. “Until we reduce the exposure in the coastal areas, we’re never going to solve this problem.”

Because of the growth in Citizens, taxpayers are now on the hook should a natural disaster strike. The entity is drastically underfunded, and even policyholders with private carriers would see surcharges on premiums should Citizens fail.

For consumers, rate hikes appear inevitable, whether with a private carrier or with Citizens.

http://jacksonville.com/opinion/blog/401574/abel-harding/2011-04-10/harding-certainty-property-insurance-reform-rates-will

PropertyCasualty360.com
by Joan Collier
April 6, 2011

Florida’s property insurance reform bill SB 408 received approval on April 5 from its final Senate committee. In its wake came a frenzy of negative media coverage. A MiamiHerald.com headline said the bill “benefits the industry,” presumably at the sole expense of the consumer. A story in the Sarasota Herald-Tribune boldly declared it is “ … legislation intended to help Florida’s struggling carriers, while offering consumers higher rates, limited rights to challenge carriers and the public burden of paying for sinkhole damage.”

Here’s the real story: The bill will increase competition by making Florida a less-onerous place to conduct insurance business, help return Citizens Property Insurance Corp. to its roots, and hopefully prevent sinkhole claims from going the way of PIP fraud.

This has to be one of the most fully vetted bills of the Florida 2011 legislative session. Prior to receiving a 9-3 approval in the committee meeting, it chalked up approximately 16 hours of Senate committee hearings and workshops, 70 amendments, and seven staff analyses. (The companion HB 803 passed by a vote of 12-3 in the House’s Insurance and Banking Subcommittee.)

The bill was destined for controversy, given its scope and the prevailing economic climate. It addresses several major problem areas in property insurance: Cost drivers such as sinkhole coverage and claims, replacement cost coverage/actual cash value provisions, and public adjusters; the size of Citizens; and excessive private market rate regulation.

Supporters of the legislation contend it will help Florida’s fragile property insurance market by cutting some costs and making the state more enticing to property insurers. Opponents see it as a windfall for insurers at the expense of consumers.

Apparently only in insurance is encouraging competition and removing barriers to solid economic growth a bad thing.

A more realistic view of the legislation is expressed by Perry Cone, an attorney at GrayRobinson and former general counsel for Citizens. Cone noted, “Senate and House leadership seem committed to helping consumers by revitalizing the private insurance market rather than over-regulating and relying on assessments to subsidize depressed rates.”

Major Components of SB 408

An analysis of SB 408 by the Florida Senate staff notes, in part, that the legislation in its original form:

Requires the Florida Hurricane Catastrophe Fund to provide reimbursement for “all incurred losses” including amounts paid as fees on behalf of the policyholder;

Increases the minimum surplus requirements for residential property insurers to $15 million;

Modifies current replacement cost coverage and actual cash value provisions relating to dwellings and personal property;

Requires windstorm and hurricane claims to be brought within three years and sinkhole loss claims to be brought within two years;

Modifies provisions related to windstorm damage mitigation discounts for residential property insurance and repeals the provision requiring the OIR to develop a method correlating mitigation discounts to the uniform home grading scale;

Revises the regulation of public adjusters by placing limits on public adjuster compensation, prohibiting certain statements in public adjuster advertising, and revising the contents of the public adjuster contract;

Removes the requirement that a property insurer must offer sinkhole coverage and eliminates application of statutes governing catastrophic ground cover collapse and sinkhole loss coverage from commercial property insurance policies;

Revises what constitutes a sinkhole loss.

The Art of Compromise

During its laborious journey in the media and lawmakers’ meeting rooms, compromises have been reached in significant areas.

Senate Rules Committee members have agreed to allow insurance companies to make payments for structural repairs as those repairs are completed and receipts produced. Currently, insurers are required to pay replacement costs up front regardless of whether repairs are made. Insurers had wanted to flip that completely, only paying for repairs upon completion of all work. In the new language, policyholders still may choose to insure the contents of their home for replacement value in a lump sum payment; however, they will pay higher premiums for that option. The changes are intended to bring Florida’s handling of replacement cost coverage more in line with the national norm and how it was handled in Florida prior to a 2005 legislative change.

The bill currently requires Citizens to offer sinkhole coverage, but limits the coverage to the primary structure on the policyholder’s property and includes several reforms, including one that requires that all claims payments be used for repairs. Private insurers will be allowed to drop sinkhole coverage, although the bill continues the requirement that policies provide “catastrophe ground collapse coverage” for the principal building, covering a home only if it is destroyed in a sinkhole.

The Rules Committee has adopted an amendment that would retain “use and file” for residential rate files, but suspend its use until May 2012. The amendment reversed an amendment sponsored by Sen. Mike Fasano, R-New Port Richey, and adopted by the Senate Budget Committee two weeks ago that would repeal “use and file” for residential filings.

The committee deleted a provision that would have allowed insurers to raise rates if they are losing money because of the much-maligned mitigation program. Introduced after Hurricane Wilma swept through Florida in 2005, the program required insurers to double-down on the discounts for property owners who made hurricane-proof improvements. The defeat of this provision is a setback for the industry. As Lynne McChristian noted in a January column for Florida Underwriter, “Insurers have reported that their underwriting profits have been slammed due, in part, to mitigation discounts.”

In a facetious moment, the committee also adopted a late-filed handwritten amendment to change Citizens’ name to “Taxpayer Funded Property Insurance Corp.” It is a safe bet that amendment will not survive.

The legislation, which is scheduled to take effect June 1, now heads to the floor of the Senate for further debate.

Joan E. Collier is Editor in Chief of Florida Underwriter magazine and the Florida Insurance Monitor and Workers’ Comp Watch e-newsletters. She may be reached at jcollier@sbmedia.com.

http://www.propertycasualty360.com/2011/04/06/floridas-property-insurance-bill-advances

Out of the Storm News
The Heartland Institute
April 1, 2011

TALLAHASSEE, FL – The Heartland Institute today unveiled a plan to erase Florida’s $3 billion budget gap.

The plan is based on a simple observation: If land-falling hurricanes were eliminated, property and casualty insurance rates would fall far below those currently extended anywhere in the state market. Banning hurricanes from making landfall in the state would allow for an immediate phase-out of the Florida Citizens Property Insurance Corporation and the Hurricane Catastrophe Fund. The $4 billion currently held in the Catastrophe Fund could be used to close the state’s $3 billion budget gap plus send a check for $200 to every family of four in the state.

“Brilliant, out-of-the-box thinking,” is how Lirpa Sloof, president and CEO of Sloof Mutual Insurance Corporation in Tallahassee, Florida, reacted to the proposal. “I have dozens of underwriters, actuaries, and producers working for me,” Sloof said. “This solution hadn’t occurred to a single one of them.”

“Some Florida politicians have long held themselves out as being all-wise, all-knowing, and all-powerful,” explained Heartland Vice President Eli Lehrer. “Banning hurricanes from entering the state easily falls within the realm of powers certain elected officials wish they had.”

Heartland President Joseph Bast said the plan’s theoretical foundations conform with sound economics. “Milton Friedman taught us that an economic theory is stronger in proportion to its assumptions being counter-factual. By assuming no hurricanes, it is very easy to predict the level of savings to the state’s taxpayers.”

Bast also reminded potential critics of the plan that “it is more realistic to assume no more hurricanes than to assume regulators are better able to set insurance rates and manage risk than private insurers and their customers.”

According to Christian Cámara, Heartland’s Florida director, laws banning hurricanes from Florida would do more good than most of the state’s existing insurance-related laws. “Florida’s insurance regulators have suppressed insurance rates all over the state, failed to promote property mitigation, let the Cat Fund grow out of control, and subsidized the development of coastal wetlands. Florida has already violated nearly every rule of sound policy out there. I see no harm in violating one more.”

Lehrer can be reached for additional comment at 202-615-0586 or elehrer@heartland.org. Cámara can be reached at 305-608-4300 or ccamara@heartland.org.

http://outofthestormnews.com/2011/04/01/heartland-institute-announces-plan-to-erase-floridas-budget-gap-outlaw-hurricanes/

Northwest Florida Daily News
March 31, 2011

According to state Sen. Alan Hays, R-Umatilla, “The people of Florida need the full truth about the extent of our property insurance dilemma.” The dilemma is complicated but it boils down to two problems:

Citizens Property Insurance Corp., a government-backed enterprise, was supposed to be the “insurer of last resort” for high-risk properties. Instead, it has become the largest property insurer in the state, with more than 1.3 million policies in force.

And because Citizens Property is a state-run operation, a major disaster could empty its coffers and stick everyone else with the bill. People who have policies with private companies could see billions of dollars’ worth of surcharges on their premiums.

The state’s first goal should be to shrink Citizens Property.

Toward that end, the Legislature is considering proposals that would bar Citizens from selling policies to cover new construction or remodeling of existing homes in environmentally sensitive and high-risk coastal areas. The company also would be allowed to raise its residential policyholders’ rates by 25 percent.

So far, so good. A smaller Citizens Property likely would reduce the risk for Floridians.

A longer-range goal would be spurring a revival of the private insurance market. “We think Citizens … should no longer compete with the private market when private insurers are willing to write (policies),” Sam Miller, executive vice president of the Florida Insurance Council, told The Associated Press.

The catch, of course, is that private insurers sometimes aren’t willing to write policies. That’s why Citizens Property was created in the first place.

Legislators have tried before to fix Florida’s property insurance mess. Will it work this time? That may depend on 1) the willingness of private insurers to cover some properties they previously wouldn’t touch, and 2) the willingness of individuals who own certain high-risk properties to either pay enormous sums for insurance or do without.

The bottom line, as far as we’re concerned, is that the state of Florida shouldn’t be in the insurance business. It ought to get out.

http://www.nwfdailynews.com/opinion/hays-38866-insurance-alan.html

St. Petersburg Times
by Janet Zink
March 31, 2011

TALLAHASSEE — Bills to increase rates for Citizens Property Insurance and push its policyholders to the private market are on the march in the Florida Legislature.

“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,” Rep. Jim Boyd, R-Bradenton, sponsor of HB 1243, told the House insurance and banking subcommittee Wednesday. “There’s a big opportunity to get private capital back.”

Proposals call for allowing Citizens to increase premiums by up to 25 percent a year, gradually eliminating coverage for some homes valued at more than $500,000 and tightening eligibility requirements so property owners could enroll in Citizens only if the policies they find cost 25 percent more than Citizens.

With support of the Republican-led Legislature and Gov. Rick Scott, the reforms are likely to become law.

Heather Carruthers, mayor of Monroe County, which includes the Florida Keys, told the House panel that increases would be too much of a financial burden on people who rely on Citizens.

“These are the teachers, the nurses, the people who bring you your food when you visit,” she said.

Despite concerns, the House committee passed the bill on an 11-3 vote.

Rep. Janet Cruz, D-Tampa, voted against the measure.

“We should not be in the business of insuring homes or businesses. But that’s where we are,” she said. “I just worry about the rates and the rate hikes that we’re imposing.”

Citizens officials have been warning that their premiums aren’t high enough to cover losses incurred if a 1-in-100-year storm hits the state. In that case, all the state’s insurance policyholders, including those not in Citizens, would have to pick up the tab.

Meanwhile, as private insurers left the state in the wake of the busy 2004 and 2005 storm seasons, the number of Citizens policies has swelled from 820,000 in 2003 to nearly 1.3 million in 2010.

Private insurers say they can’t compete with Citizens’ low rates.

The Senate banking and insurance committee passed a bill similar to Boyd’s by a vote of 6-4 on Tuesday.

Sen. Alan Hays, R-Umatilla, sponsor of SB 1714, said he doesn’t like the idea of raising rates, but when it comes to Citizens, he believes it’s essential to keep the program solvent if a major storm hits.

“Currently, we’re playing Russian roulette,” he said.

Sen. Mike Fasano, R-New Port Richey, was among those who voted against the Senate bill.

“Every time I turn around, I see another rate increase,” he said. “It’s a tax. It’s a fee. Call it what you want.”

Sen. Gwen Margolis, D-Miami, argued that the bill strikes a blow to the already struggling real estate market.

Homes won’t be sold, she said, because owners won’t be able to get property insurance.

“The cost of insurance is just too high,” she said. “We are not going to get new residents in Florida as a result.”

Janet Zink can be reached at jzink@sptimes.com or (850) 224-7263.

http://www.tampabay.com/news/business/banking/citizens-rate-increases-marching-to-legislative-approval-in-tallahassee/1160717

Florida Tribune
by Gary Fineout
March 30, 2011

Saying it needs to shore up its finances in advance of hurricane season, Citizens Property Insurance plans to purchase private reinsurance and borrow as much as $1 billion in the next few months.

The board that oversees the state-created carrier on Wednesday discussed the need to boost company finances in case Florida gets hits with a major storm — or endures a series of smaller storms similar to what happened in 2004 and 2005. A major hurricane could cause $22 billion in losses for Citizens, which has 1.3 million policyholders across the state.

“If there was a second storm, we would be in very serious trouble,” said Tom Lynch, a member of the Citizens Board of Governors.

Citizens Chairman Jim Malone said that he and staff from Citizens visited Bermuda earlier this month where they met with representatives of the world’s major reinsurance firms, many of whom are based in the tiny island nation in the Atlantic.

Citizens has purchased private reinsurance in the past, a spokeswoman for the carrier said. But usually Citizens has just relied on the state-backed Florida Hurricane Catastrophe Fund as a backstop. If Citizens does not have enough money on hand to pay off its claims, the carrier has the power to place assessments on insurance policies, including auto insurance policies.

But Citizens is also considering whether to borrow anywhere from $500 million to maybe as much as $1 billion ahead of the hurricane season. Citizens is expected to have a $5.7 billion surplus at the end of the year but it could need additional money because the Cat Fund only reimburses insurers after claims have already been paid.

Financial advisors for Citizens initially suggested borrowing no more than $700 million. But Carlos Lacasa, a member of the Citizens board, wanted to look at borrowing even more money, maybe as much as $1 billion.

“We don’t want to be in a position where we are scrambling to raise cash where we have a deficit,” Lacasa said.

The push by Citizens to get more money for its finances comes as the Florida Legislature debates whether or not to let the carrier raise its rates as much as 25 percent a year. Currently, Citizens rates are capped at 10 percent a year. The bills to let Citizens raise its rates cleared House and Senate insurance committees this week. But some lawmakers have complained that the Citizens legislation could hurt consumers and cause problems for the troubled real estate market in the state.

http://fltrib.com/floridas-biggest-insurance-carrier-says-it-needs-shore-its-finances-hurricane-season?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+thefloridatribune+(The+Florida+Tribune)