Don Brown

Florida Today
By Dave Berman
April 25, 2012

BAREFOOT BAY — Residents of Florida’s largest manufactured home community are upset that they are paying more and getting less for hurricane insurance coverage on their residences.

On Tuesday, they told two officials from their insurer, the state-created Citizens Property Insurance Corp., of their concerns in no uncertain terms. They even indicated they will look into forming their own insurance company, rather than paying Citizens’ continually rising rates.

About 330 residents of Barefoot Bay and nearby communities packed a community center meeting room to express their views and hear from Citizens, an official of the Florida Office of Insurance Regulation and Rep. Tom Goodson, who represents them in the Florida House. The meeting was a bit heated at times, and at least some in the audience left the meeting unsatisfied.

Although the issues they focused on dealt chiefly with coverage for manufactured or mobile homes, the issue of hurricane coverage rates and availability is prevalent throughout the Southeast .

Citizens was created to provide hurricane coverage to property owners who could not get insurance from private carriers. It insures about 4,500 of the 4,900 properties in the Barefoot Bay community at the southern end of Brevard County, according to Christine Ashburn, the company’s director of legislative and external affairs. Many of the other homeowners in Barefoot Bay go without hurricane insurance.

Citizens has grown into the largest property insurer in the state, with about 1.5 million policies.

Monte Stevens, director of governmental affairs for the Florida Office of Insurance Regulation, said insurance availability is a major issue in hurricane-prone areas. Homeowners, both of traditional homes and mobile homes, are “either having rates go through the roof” or having trouble finding an insurer, Stevens said, something state officials are trying to address by attempting to get more companies to enter the market.

But Ashburn said it wouldn’t be a good idea for the state to force Florida’s auto insurers to also offer homeowners’ insurance as some have suggested. She said that could start an auto-insurance crisis, with soaring rates, as insurers stop writing auto policies in Florida, rather than start writing homeowners’ policies.

One of the immediate concerns at Barefoot Bay is the decision by Citizens to discontinue offering insurance coverage for carports and pool and porch screens, effective when policies are renewed this year. Citizens said many private insurers are doing the same .

At the same time, Barefoot Bay homeowners are seeing their Citizens premiums rise by an average of 10 percent this year.

Stevens said that’s because computer models and simulations indicate that the area that includes Barefoot Bay has been undercharged in the past, and the rate increase helps the premiums catch up . That was a view that drew hisses and boos from some in the crowd.

“That’s your answer to your question,” Stevens said. “It’s not going to be a popular one.”

Residents also didn’t like the fact that a lack of hurricanes in the past doesn’t translate into lower rates in the future, under the current rate-setting system.

And they questioned why they aren’t able to get discounts from Citizens on their premiums for hurricane-hardening measures they take, in contrast with the discounts offered to owners of traditional site-built homes.

Ashburn said there have been no studies to prove hardening measures reduce damage to manufactured homes in a hurricane, so Citizens cannot offer such discounts.

When some residents started to call out comments while she was answering the question, Ashburn said: “You want me to answer, or are you going to answer for me?”

At one point in the meeting, Barefoot Bay Homeowners Association President Bob Kahl asked how many of those in the audience wanted to explore forming a new insurance company as an alternative to Citizens. Most raised their hands, so Kahl and his executive board will research the options, with the help of officials at a local insurance agency.

Kahl said Barefoot Bay residents typically pay Citizens $1,500 to $2,600 a year to insure their manufactured homes.

Brevard County Commissioner Trudie Infantini, whose district includes Barefoot Bay, advised those in the audience that it would be “a long haul” and “a monumental amount of work” to form an insurance company. But she said she supports their efforts.

After the meeting, Stevens said Barefoot Bay forming its own insurer is perfectly legal, although it will be difficult because of the high coverage risk involved. Not only is it a manufactured home community, but the relatively compact geographic area means that a large percentage of those insured would have claims if a hurricane passed through the area.

In the meantime, Ashburn and Steve Bitar, Citizens’ senior director of consumer and agent services, advised Barefoot Bay residents to contact their local insurance agent to discuss whether to reduce their dollar level of coverage to reflect the fact that their screens and carports no longer are covered. Ashburn said some companies are or may soon offer supplemental coverage for screens and carports.

Goodson, R-Rockledge, told the residents that he doubts they will see significantly cheaper insurance premiums in their lifetimes, but suggested letting their state and congressional representatives know their concerns about property insurance.

“It doesn’t get us any closer to resolving anything,” said Barbara Jedrey, 68, a 23-year resident of Barefoot Bay. She said she is worried that the lack of insurance coverage for carports will create “a lot of uproar” within the community because either carports or garages are required under the community’s deed restrictions.

Terence Maguire, 73, a four-year resident of Barefoot Bay, said he was happy about the turnout at the meeting. But he didn’t feel satisfied by the lack of specifics about the financial data related to Citizens’ revenue and profits derived from Barefoot Bay.

http://www.tcpalm.com/news/2012/apr/25/angry-barefoot-bay-homeowners-take-aim-citizens-in/

Out Of the Storm News
By R. J. Lehmann
April 24, 2012

Days after Florida Gov. Rick Scott vetoed a bill that would have devoted up to $1.5 billion in funding to the Florida Hurricane Catastrophe Fund through a new program of tax credits, he joined with other members of the Florida Cabinet April 24 in approving a 15% increase in rates the Cat Fund will charge in 2012.

The Cat Fund’s 2012 premium formula assumes a per event retention of $7.4 billion and a limit level of $17.0 billion. It is estimated to contribute a roughly 2% rise in consumer property insurance rates.

Though it is hardly the full-scale overhaul of the Cat Fund’s financing structure that we would have liked to have seen in this year’s legislative session, the rate hike is still certainly welcome news for a state-run reinsurer that was projected to have a $3.2 billion funding shortfall this past year.

Another attempt to shore up the Cat Fund’s financing fell by the wayside with Scott’s decision to veto H.B. 5505, which would have offered discounts to insurers that agreed to “pre-pay” their state premium taxes. While the bill’s primary goal was to improve efficiencies in the state’s Division of Workers’ Compensation, banking groups successfully lobbied to include a provision that would have called for issuing $1.5 billion in tax certificates whose proceeds would have been devoted to the Cat Fund.

This is, of course, simply robbing Peter to pay Paul. The certificates didn’t create any new funding; they simply shifted premium tax funds that would have gone to Florida’s general account to the Cat Fund instead. The Cat Fund would eventually be expected to pay back any funds used by the program. We at The Heartland Institute didn’t have a formal position on the bill, and while we certainly support shoring up the Cat Fund’s finances, we do think it would set something of a dangerous precedent to do so with general account funds.

“I am convinced that the governor did exactly the right thing to veto H.B. 5505 because of the provisions that were added at the last minute that were unvetted and included the prospect of several unintended consequences,” said Heartland Senior Fellow Don Brown, a former chairman of the Florida House Insurance Committee. “The governor made a good ‘catch’ on this one.”

In other Cat Fund news, the AA rating of the fund, its $3.5 billion in pre-event floating rate notes and its $1.6 billion in outstanding post-event bonds were all reaffirmed April 24 by Fitch Ratings.

Fitch said it views the Cat Fund’s ability to levy assessments of up to 6% a year and 10% for cumulative years on nearly all insurance policies in the state to be “a very stable source of revenue.” Because non-payment of emergency assessments is grounds for cancellation of the policy, collection rates are close to 100%, the rating agency noted.

The lines are very broad and include all property and casualty insurance, excluding only accident and health, workers’ compensation and medical malpractice. As the Florida economy overall was hit very hard by the recession, the base declined from a high of $37.6 billion in 2006 to a low of $33.3 billion in 2009. The base has stabilized and at the current level of $33.6 billion it could generate up to $3.4 billion per year in support of debt service, or almost 9 times (x) maximum annual debt service on bonds currently outstanding.

However, Fitch did warn that Florida’s insurance market remains somewhat unstable and vulnerable.”

“Many larger, financially stronger insurers have either stopped writing new policies or are completely exiting the market, shifting the risk to the smaller, thinly capitalized, Florida-only insurers that are mostly unrated or low rated,” the rating agency said.

http://outofthestormnews.com/2012/04/24/florida-cabinet-approves-15-cat-fund-rate-increase/

Herald-Tribune
By Zac Anderson
April 24, 2012

Stymied by lawmakers who have balked at larger premium increases for Citizens Property Insurance Corp., advocates for higher rates at the state-run insurer are proposing a backdoor plan that skips legislative approval.

A proposal to stop capping rates for new policies will go before the Citizens board Thursday, setting the stage for a potential political “firestorm,” one expert predicted.

If approved, the plan would leave Florida’s largest property insurer with a multi-tiered rate structure. Price increases would still be capped at 10 percent for existing customers, but new policies could jump substantially.

Proponents contend that increasing Citizens’ rates could make private insurers more competitive, potentially luring companies back to Florida’s beleaguered insurance market.

But critics say the proposal is legally questionable and likely to be challenged in court. They worry the plan would hurt the real estate industry in areas such as Sarasota County, where Citizens is a dominant carrier.

Homeowners might be hesitant to move if it means a big spike in insurance costs. Buyers from outside the region could also think twice if insurance becomes too expensive, said Sen. Mike Fasano, R-New Port Richey, a frequent Citizens critic.

“You will see future home buyers that will not be able to afford a home if they put these new rates in place,” Fasano said Tuesday. “How does that help our economy?”

Fasano successfully rallied his colleagues in recent years against legislation backed by Gov. Rick Scott and many top lawmakers designed to allow larger rate increases than the 10 percent cap established in 2009 and to move customers out of Citizens.

As a result, Scott has urged a Citizens board that includes a number of his appointees to make administrative changes that shrink the company without legislative approval.

During a visit to Sarasota earlier this month, Scott told local business leaders that “we are focused on depopulating Citizens.”

Questioning the legality

Even some insurance industry experts who generally support efforts to reduce Citizens’ market influence say the latest proposal goes too far.

Jeff Grady, president of the Florida Association of Insurance Agents, said Citizens’ rates need to more realistically reflect the company’s liabilities after a major disaster. But he questioned the legality of lifting a rate cap without legislative approval.

State laws says Citizens’ annual rate increases shall “not exceed 10 percent for any single policy issued by the corporation.”

Citizens lawyers are now making the case that the language applies only to existing policies and that the company can charge higher rates to new customers. But that is not how Citizens has operated since the rate cap was passed.

“It’s going to be questioned whether this interpretation is the right one, particularly if Citizens has a precedent of acting one way and then starting to act another,” Grady said.

Insurance agents already are angry with Citizens because “they don’t understand why the consumer who has been put into the situation of having no other choice but Citizens is being beat up,” Grady said.

Removing the rate cap for new policies could breed more resentment and create a backlash if it appears the agency is skirting the proper legal channels and “doing things some might think are not in the light of day.”

“People start to question your motives and develop constituencies that make something that might be a problem before an even bigger one,” Grady said. “I worry that if people start to challenge these things the real progress that might be made could be stunted.”

Citizens board member John Rollins said in a brief email that the proposal to uncap rates and other new efforts to shrink the company’s exposure “have been vetted by Citizens general counsel as not requiring legislative actions.”

Rollins did not offer his thoughts on the policies, noting “we’ll all have more to say” on Thursday. Citizens spokeswoman Christine Ashburn did not return a phone message.

The latest round of “exposure reduction initiatives” also includes a requirement that insurance agents submit documentation to Citizens certifying that no private carriers were willing to write a policy. There also is a proposal to increase minimum deductibles, meaning customers could be paying more for less coverage.

“The idea is just to make the policy really ugly,” so people will find another insurer, Grady said. “I kind of like it. I think it’s a clever idea except where there is really no other choice but Citizens.”

If Citizens is truly the only option, higher deductibles do not seem fair, Grady added.

A financial risk?

Citizens was created as the state’s insurer of last resort. It has become the largest property insurer in Florida with more than 1.4 million policies.

The company has the power to levy a tax on insurance policies throughout Florida if it runs out of cash to pay claims after a major disaster, leading Scott and many lawmakers to argue Citizens is a huge financial risk for Florida residents.

But with nearly $6 billion in reserves and a strong backstop of cash from the Florida Hurricane Catastrophe Fund, Citizens has the resources to pay claims without resorting to assessments in all but the most catastrophic hurricane.

Sarasota real estate broker Dave Beachy said the state should consider incentives for private insurers that take policies away from Citizens, but he worries about raising rates during a fragile economic recovery.

Beachy wrote in an email that most of his clients have no other option but Citizens and there could be fewer home sales if they are faced with larger insurance bills.

“Real estate is still trying to rebound from the bubble burst and raising the rates could slow down our recovery,” Beachy wrote.

Advocates for a Citizens rate hike say the company artificially holds down prices, stifling competition. As Citizens becomes more expensive, they say, private companies will become more attractive in markets currently dominated by Citizens.

But Sean Shaw, the former consumer advocate in the state Office of Insurance Regulation, said there is little evidence of that so far.

“That’s the great promise,” Shaw said, noting such theories “sound great in a textbook” but may not play out as expected in Florida’s complicated insurance market.

Insurers have collected unprecedented sums in premiums while Florida has gone a record six consecutive years without a direct hurricane strike. Yet rates continue to rise.

Shaw predicted a political “firestorm” over uncapped rates.

“There’s actuarially what you can charge and then there’s what people can actually stand,” he said. “There’s just a question of fairness that is a lot of times missing in these discussions when you’re reducing people to actuarial figures.”

Fasano believes consumers are at a breaking point with insurance costs. He expects a court challenge if Citizens’ board approves lifting the rate cap.

“The law is clear; they are not to raise rates as they are suggesting or moving towards,” he said. “They need to hold off until the Legislature takes action.”

http://politics.heraldtribune.com/2012/04/24/citizens-to-consider-removing-cap-on-new-policy-premium-increases/

Florida Voices
By Bill Hager
April 23, 2012

The countdown has begun and the start of the 2012 Atlantic Hurricane Season is around the corner. Just weeks ago the Florida Legislature ended its regularly scheduled state session, and while some important legislation which benefits the citizens of this great state passed, legislation to address the much needed reform of Florida Hurricane Catastrophe Fund failed.

Based on its own analysis, the Cat Fund would have been unable to pay its claims in three of the past four years. Even with “hurricane tax” assessments levied on the insurance policies of all Floridians, as of October 2011 the fund faced a potential $3.2 billion shortfall. In the wake of the next major storm or series of storms, this shortfall has the potential to dramatically impact the state and analytical data suggests that if the Cat Fund has a shortfall of 20 percent after a storm, a significant number of Florida insurers would be insolvent or otherwise unable to continue in business.

Working with Senator J.D. Alexander (R-Lakes Wales), we sponsored House Bill 833 and Senate Bill 1372, which were based on a proposal by the Cat Fund’s Chief Operating Officer Jack Nicholson. Supported by consumer, taxpayer, environmental, nonprofit and business groups as well as Floridians just like you, the bills would have reduced the risk associated with annual “hurricane tax” assessments which could last as long as 30 years and will be levied on all homeowner, business and automobile policyholders. Additionally, the legislation aimed to begin the process of “right sizing” the Cat Fund to ensure the fund can fully pay its obligations in the future, and would have helped foster a more stable property insurance market that encourages strong companies to return to our state and compete for our business.

While other legislative leaders including Senators Alan Hays (R-Umatilla) and Garrett Richter (R-Naples) supported the bills, not all of Florida’s elected officials chose to address this very serious problem. Opponents of the legislation argued HB 833 and SB 1372 would have caused rates to go up, however, in reality, the bond markets have already created the rate impact and rates may very well go up without the legislation in place.

As an elected official, my objective is not to create a situation that negatively affects my constituents or any other Floridians. In fact, I am simply working to correct a situation that has been wrong for many years. The Cat Fund knowingly fails to collect enough premiums in advance, subsidizing the few at the expense of the many by relying on taxpayer backed bonds to pay their claims. This is unfair and there are dire consequences associated with allowing the fund to continue along this current path.

While we have been storm-free for the past six years, should a storm hit Florida this hurricane season, the fund’s current structure as well as the structure of the overextended Citizens Property Insurance Corp. could very well be collectively responsible for the largest tax increase in Florida’s history. Absent changes in the way these state insurers operate, the reality is that these hurricane taxes are inevitable and likely to be substantially worse than if gradual adjustments are made to the system.

At this point we are left to wait and hope we are spared another year. Hopefully our good luck has not run out and the Florida Legislature will have another opportunity to rectify the current situation during the 2013 state legislative session. Until then, I encourage you to continue following the developments regarding the Cat Fund and urge you to support future legislation which will make the necessary changes to protect all Floridians.

Rep. Bill Hager, R-Boca Raton, represents District 87 in the Florida House of Representatives.

http://www.floridavoices.com/myturn/expect-big-hurricane-tax-if-big-wind-blows

Tampa Bay Online
By Bill Hager
April 18, 2012

Just weeks ago the Florida Legislature ended its regularly scheduled session, and while some important legislation that benefits the citizens of this great state passed, legislation to address the much-needed reform of the Florida Hurricane Catastrophe Fund failed.

Meanwhile, the countdown has begun: The start of the 2012 Atlantic hurricane season is around the corner.

Based on its own analysis, the Cat Fund would have been unable to pay its claims in three of the past four years. Even with “hurricane tax” assessments levied on the insurance policies of all Floridians, as of October 2011 the fund faced a potential $3.2 billion shortfall.

In the wake of the next major storm or storms, this shortfall has the potential to dramatically impact the state. Analytical data suggests that if the Cat Fund has a shortfall of 20 percent after a storm, a significant number of Florida insurers would be insolvent or otherwise unable to stay in business.

Working with Sen. JD Alexander, R-Lakes Wales, we sponsored House Bill 833 and Senate Bill 1372, which were based on a proposal by the Cat Fund’s chief operating officer, Jack Nicholson. Supported by consumer, taxpayer, environmental, nonprofit and business groups, the bills would have reduced the risk associated with annual “hurricane tax” assessments, which could last as long as 30 years and will be levied on all homeowner, business and automobile policyholders.

Additionally, the legislation aimed to begin the process of “right sizing” the Cat Fund to ensure the fund can fully pay its obligations in the future, and would have helped foster a more stable property insurance market that encourages strong companies to return to our state and compete for our business.

Opponents of the legislation argued HB 833 and SB 1372 would have caused rates to go up. However, in reality the bond markets have already created the rate impact, and rates may very well go up without the legislation.

As an elected official, my objective is not to create a situation that negatively affects my constituents or any other Floridian. In fact, I am simply working to correct a situation that has been wrong for many years. The Cat Fund knowingly fails to collect enough premiums in advance, subsidizing the few at the expense of the many by relying on taxpayer backed bonds to pay their claims. This is unfair. There are dire consequences associated with allowing the fund to continue along this current path.

While we have been storm-free for the past six years, should a storm hit Florida this season, the fund’s current structure, as well as the structure of the overextended Citizens Property Insurance Corp., could well be collectively responsible for the largest tax increase in Florida’s history. Absent changes in the way these state insurers operate, the reality is that these hurricane taxes are inevitable and likely to be substantially worse than if gradual adjustments are made to the system.

At this point we are left to wait and hope we are spared for another year. Hopefully, our good luck has not run out and the Legislature will have another opportunity to rectify the situation during the 2013 session. Until then, I encourage you to continue following developments regarding the Cat Fund and to support future legislation that will make the necessary changes to protect all Floridians.

http://www2.tbo.com/news/opinion/2012/apr/18/naopino2-legislature-blew-it-on-cat-fund-ar-393582/

The Palm Beach Post
By Charles Elmore
April 5, 2012

The outgoing chief of Citizens, Florida’s insurer of last resort, says his “heart goes out” to homeowners with affordability concerns, but he supports rate increases more than the allowed 10 percent a year.

That’s the “glide path” legislators approved years ago, and Scott Wallace said he thinks Citizens rates should rise faster to make the market more attractive for private-sector insurers. He’s working for one in his new job.

“From a personal standpoint, I’d like to see the glide path jacked up a little bit,” Wallace said in an interview with The Palm Beach Post. “I can certainly see the affordability issues cited by many people and I feel for them.”

Wallace leaves his post after six years, making him the longest-serving president and CEO of what has become by far Florida’s largest insurer, 10-year-old Citizens Property Insurance Corp. His official final day was Friday . He takes over as president of the property and casualty division of a private carrier serving the Florida market, Homeowners Choice Inc.

“Whether it’s Citizens or the voluntary market, the difficulty is rates have certainly gone up,” Wallace said. “That’s troubling. I can certainly sympathize with it. On the other hand, until we get Citizens more closely in line with the voluntary market, Citizens will continue to have problems in terms of its growth and size in the state of Florida.”

The toughest part of running Citizens has been dealing with “many, many constituencies,” he said.

“Certain legislators have different opinions than other legislators,” Wallace said. “Sometimes it’s difficult to move forward in ways I think are appropriate to move forward.”

Sen. Mike Fasano, R-New Port Richey, sent a letter to Wallace this year questioning Citizens on such issues as spending large amounts of money on lawyers to fight claims, applying rules consistently and canceling policies.

“Scott Wallace was asked to downsize what had become the largest property insurer in Florida,” Fasano told The Post. “Although I did not agree with many of the changes that were made under his leadership, particularly those that harmed the policyholder, I understood that his orders came from the governor and the board. He was always accessible to our office and that is something I will always appreciate.”

Gov. Rick Scott has called for Citizens to shrink to avoid potential assessments to its own customers and those of other companies if, say, the state is hit with a once-in-100 year storm.

Replacing Wallace as interim Citizens chief is Tom Grady, who has served as commissioner of Florida’s Office of Financial Regulation. Grady is a candidate for the permanent job as well.

Insurers and supporters in the legislature contend much higher rates at Citizens are necessary, though some consumer advocates call it a “myth” that rates are artificially low.

A Post analysis shows carriers besides Citizens have paid fewer direct losses in Florida since 2000 – 66 cents on the premium dollar – compared to 76 cents since 1985. Insurers cite increased reinsurance and other costs.

Citizens introduced many policies on Wallace’s watch that produced protests from customers, including reinspections for storm-resistant features that raised bills an average of 22 percent for 62 percent of those visited through March. More than 200,000 homes are scheduled to be reinspected this year.

As of May 1, Citizens is refusing to insure properties valued at more than 1 million. Also no longer covered this year: Most porches, decks and outbuildings.

At times, Wallace made announcements consumer advocates praised, such as accepting alternative ways of calculating replacement value besides a single software vendor. Replacement costs – the insurer’s projected cost of rebuilding a destroyed home – were running double the market value of some existing homes and had the effect of driving up bills unfairly, some homeowners argued.

Citizens, the state’s largest property insurer with more than 1.4 million customers, controls almost 30 percent of Palm Beach County’s market with more than 140,000 policies. That’s bigger than the carrier’s 23 percent share statewide.

In Palm Beach County, Citizens has 80 percent more local policies than the nearest private-sector competitor, Universal Property & Casualty.

Wallace’s new employer, Tampa-based Homeowners Choice, had a little more than 5,000 policies in Palm Beach County at the end of the third quarter of 2011. The company ranked 23rd in local market share and 29th statewide with more than 57,000 customers.

Citizens Chairman Carlos Lacasa said when Wallace announced his resignation: “Scott has led the company through a complex ramp-up of the infrastructure needed for Citizens to provide the services and possess the claims payment ability that is so essential to our state’s housing industry.”

Lacasa said, “His talents will be sorely missed.”

Wallace made $220,000 when he was hired in his current role and leaves with a base salary of $330,000, a spokeswoman said.

The most fulfilling part of his job at Citizens, Wallace said, has been “watching the organization grow and develop in terms of its people. They are constantly looking at ways to improve.”

Now he’ll play a different role.

“I’m certainly excited about the new opportunity I’m moving to,” Wallace said. “I look forward to getting back to a situation where we can earnestly work at building new markets and new opportunities.”

http://www.palmbeachpost.com/news/weather/hurricanes/outgoing-citizens-insurance-boss-backs-steeper-rat/nN2wn/

thefloridacurrent.com
By Gray Rohrer
April 5, 2012

Lawmakers who backed legislation to shrink the size and coverage of the Florida Hurricane Catastrophe Fund, or Cat Fund, lamented the bills’ failure Thursday, and vowed to fight for similar changes next year.

Sen. JD Alexander, R-Lake Wales, and Rep. Bill Hager, R-Boca Raton, sponsored bills (SB 1372 and HB 833) that would have reduced the Cat Fund’s coverage from $17 billion to $12 billion over five years and increased co-pays for insurers. In the statement, Alexander said the measure is needed to protect Floridians by covering a potential $3.2 billion shortfall if a one-in-100 year hurricane (a storm with a 1 percent chance of happening each year) were to hit the state.

“It’s extremely disappointing that good legislation which is necessary, cheap and honest was not seriously considered this session. While there were many important issues the full Legislature had to consider this year, as leaders of a hurricane-prone state this legislation should have been at the top of everyone’s list,” Hager said.

But opponents of the measure said that insurance companies would undoubtedly pass the cost of more expensive, private market reinsurance on to consumers, boosting premiums at a delicate time for homeowners struggling with underwater mortgages and foreclosure risks.

The bill cleared one Senate committee before it stalled in that chamber, and never came up for a vote in any House committee. Alexander tried to tack on a watered-down version of the bill to another insurance bill (HB 1127), but it was stripped on the floor of the Senate.

Alexander is term-limited, but Hager is a first-term House member. He says he will continue to push for Cat Fund changes next year.

“The reform included in SB 1372 and HB 833 was necessary and inexpensive compared to the risk and the alternatives. While we unfortunately did not make any progress this session, I pledge to continue the fight next year and put Florida on a needed path to stability,” Hager stated.

But Sen. Mike Fasano, R-New Port Richey, who led the effort to strike Alexander’s Cat Fund amendment from HB 1127, said the Legislature is not likely to pass bills that increase homeowner’s insurance premiums.

“There’s very little appetite both in the House and Senate for that,” Fasano said. “That bill would absolutely do that (increase rates), no ifs, ands or buts.”

Hager and Alexander counter that insurance companies will need to fill the gap of the potential shortfall by purchasing reinsurance in the private market anyway, meaning rates would go up in any case. But if Hager wants to get his bill through next year he could have another obstacle in his path. Fasano, term-limited in the Senate, has filed to run for a western Pasco County House district that is encompassed by his current Senate district.

Tampa Bay Online
Editorial
March 11, 2012

The Florida Legislature unfortunately ended its 2012 session Friday without taking steps to further “depopulate” the state-run Citizens Property Insurance Corp. Lawmakers and other state officials must make it a priority.

Intended as the property insurer of last resort in Florida, Citizens has swelled to the state’s largest, with 1.5 million policies. This dangerous policy must be reversed.

Citizens’ customers in many cases enjoy rates below those charged by the private market, which dropped them. But giving a good deal isn’t Citizens’ purpose. It should not continue providing low rates and coverage in direct competition with private insurers and deterring more private capital from investing in Florida.

The state and all its insured property owners are on dangerous turf because of Citizens’ vast umbrella. As of late September, Citizens had a total exposure of more than $508 billion. Yet, according to state reports, it had only $12.9 billion available to pay claims last hurricane season.

Citizens has estimated the “one-in-100-year” hurricane, which officials say has a 1 percent probability of striking, would cost more than $22 billion. This is simply too much risk for all insured property owners in the state — who must pay assessments when Citizens doesn’t have enough money to pay claims.

Citizens is required to maintain a program to reduce its number of policyholders, and it is making inroads. In 2009 and 2010, Citizens shed a total of more than 200,000 policies.

The entity is taking steps to stop offering better deals than private insurers. This includes eliminating “builders’ risk” coverage, which covers a builder while a project is being constructed. Citizens has been providing much cheaper coverage than the private market, says state Insurance Commissioner Kevin McCarty.

The Legislature had a chance to make more inroads this session, but a bill by Sen. Garrett Richter, R-Naples, met heavy resistance and died. Richter’s bill would have allowed “surplus lines” insurers to take on Citizens’ policies.

These insurers are not regulated by the state and thus don’t need state approval for rates or rate increases. In addition, a policy covered by a surplus lines company isn’t backed by the Florida Insurance Guaranty Association, which usually pays claims if licensed insurers go broke or collapse.

A major flaw in the bill was that surplus lines firms — which would have had to meet certain legislative requirements, including “maintaining” $50 million “in surplus” — would have been able take a Citizens’ policy without a policyholder initiating it.

While a property owner could have elected to stay in Citizens, such a forceful policy is unfair. It should be up to a property owner to make that decision after evaluating the risks — the state shouldn’t allow a company to make the decision and then tell an owner to “opt out” if the terms aren’t right.

Fortunately, the legislation was amended in the Senate to protect Citizens’ customers from being targeted so easily, and that helped lead to its death in the House.

Would surplus lines insurance help reduce Citizens’ scope? It’s worthy of more consideration. It could be another much-needed tool, not only to shrink Citizens but to offer property owners more choices.

McCarty says this type of coverage “will fill a greater void in the future.” Already, he says, surplus lines insurance is “used extensively” in Florida, covering commercial properties and “high-value” homes.

For Citizens’ policyholders, it could be a viable alternative. For one thing, they would no longer be subject to the assessments Citizens hits its policyholders with when facing a deficit.

Citizens officials and state lawmakers should continue working to depopulate the entity. Reducing Citizens’ lines of coverage, avoiding risky, hazardous areas, particularly barrier islands, and putting a stop to covering homes worth hundreds of thousands of dollars will help do it. And lawmakers shouldn’t give up on determining whether surplus lines insurers can play a role as well. If Citizens is going to remain, it needs to be the insurer of last resort.

http://www2.tbo.com/news/opinion/2012/mar/11/vwopino1-depopulating-citizens-ar-367513/

Tallahassee Democrat
By Steve Pociask
March 2, 2012

For years, Florida’s property insurance crisis has remained unsolved, with an ever-building mountain of unfunded debt obligations building up, driving up consumer costs, creating unnecessary risk and uncertainty, hampering Florida’s economic recovery and discouraging insurance competition for your business.

Epitomizing these crises, the leadership of the Florida Hurricane Catastrophe (CAT) Fund has testified to the governor and the Legislature that, because of changes in the bond market, the CAT Fund faces a financing hole of $3 billion or more, leaving it unable to keep all of its promises. This threatens numerous insurers with insolvency and consumers with unpaid claims and future costs increases.

The CAT Fund’s chief operating officer, Jack Nicholson, has described the current fund as “dangerously overexposed.” However, without financial solvency, what good is your insurance policy?

Despite these alarms, Florida’s consumers finally have some reasons to feel encouraged. After years of relying on luck rather than responsible action, Senate Bill 1372, sponsored by Sen. JD Alexander, R-Lake Wales, and House Bill 833, sponsored by Rep. Bill Hager, R-Boca Raton, will help to reform the CAT Fund, reduce the risk of financial calamity caused by the current structure of the fund and benefit consumers statewide. Both bills were created based on a proposal from the CAT Fund’s chief operating officer, and they are necessary for consumer protection.

Businesses and many consumers statewide have suffered from the risk of insurer insolvency, with about a dozen insurers facing liquidation in recent years despite the absence of hurricanes. Floridians also have been burdened with the formerly hidden “hurricane taxes” — policyholder assessments, which have been as high as 8 percent and have been levied on most Floridians, even those who do not benefit from the state’s broken system.

These risks have been hard to communicate, but Floridians are catching on.

A recent survey by the American Consumer Institute found that 70 percent of Floridians fear being assessed these “hurricane taxes,” including those that would result if the CAT Fund runs out of money to meet its obligations. In addition, 80 percent of the consumers surveyed did not want the state to sell more insurance coverage than it could pay in claims, and nearly half of consumers were willing to pay more if it would help avoid insolvencies and taxes.

When it comes to protecting insurance consumers, solvency means everything.

In this case, the proposed bills will increase private capital in the market and increase market solvency, thereby protecting homeowners from potential financial losses. Moreover, these proposals protect consumers from unnecessary cost increases, and they put our state on firmer financial footing.

As a consumer, you should know fixing the CAT Fund is necessary.

Unfortunately, these bills have recently been obstructed by some who place politics over sound policy, but similar reform language may be added to other proposed legislation.

Whatever legislative route CAT Fund reform ultimately takes, it deserves serious consideration by lawmakers.

Florida Chamber of Commerce
Important Update
March 5, 2012

Florida’s property insurance system is broken. Florida is financially unprepared for a major hurricane and our current financing model could be the single biggest threat to our economy.

A Florida Chamber of Commerce-backed bill that will improve Florida’s broken property insurance system passed the Senate Budget Committee on Saturday morning. SB 1346 by Sen. Steve Oelrich will take important steps to right-size Citizens by giving Citizens the tools to appropriately assess policyholders should assessments be necessary as a result of a future storm.

A Florida Chamber-backed amendment by Sen. JD Alexander addressing reforms to the Florida Hurricane Catastrophe Fund (CAT Fund) also passed and was added to this legislation. Had Florida been hit this year by a category 4 or 5 hurricane, the CAT Fund may have been short as much as $3.2 billion to cover obligations. Sen. Alexander’s amendment appropriately reduces the exposure of the CAT Fund.

The Florida Chamber thanks Sen. Oelrich and Sen. Alexander for their commitment and support of a more free market-oriented and stable insurance market for Florida. SB 1346 now heads to the Senate floor.

“The Florida Chamber of Commerce has a rich history of engaging in insurance reform efforts that create a more competitive and stable insurance market,” said David Hart, Executive Vice President of the Florida Chamber. “We have long-held that Florida needs more free market insurance opportunities than the existing government-run Citizens Insurance.”

Reform to these entities are critical because Citizens Insurance has grown from the insurer of last resort to the insurer of first resort and reforming both Citizens and the CAT Fund will help to eliminate the “hurricane tax” assessment levied on Florida businesses, homeowners, renters, charities, churches and drivers to cover costs associated with major hurricane losses.

Without reform, Florida remains a ticking time bomb until the next hurricane makes landfall, where future “hurricane taxes” could amount to over 50 percent of insurance premiums each year for up to 30 years and will be financially devastating to the business community. Also, because Citizens Insurance and the CAT Fund will not have the capacity to pay claims for future storms, they will rely entirely on taxpayer-backed debt – further threatening Florida’s economy and job creation.

http://www.flchamber.com/article/florida-chamber-backed-bill-improving-floridas-broken-property-insurance-system-passes-senate-committee/