Don Brown

The Tallahassee Democrat
By Lynne McChristian
February 17, 2012

We are all citizens of Citizens Property Insurance Corp. and its cousin, the Florida Hurricane Catastrophe Fund. We created them, subsidize them and are on the hook to bail them out.

Today, more people are waking up to the fact that both are significantly overexposed to a catastrophic financial failure, with enormous consequences for us all.

Some of us wonder what took so long for an alarm to sound.

The system is simple — and scary. Florida is financing the recovery from storms, which may strike any year, with future money from the pockets of every person with a homeowner’s insurance policy or an auto, business or boat insurance policy — no matter what insurance company has their business. The resulting economic dangers Florida faces from the costs of a major hurricane are real, not imagined.

Eight of the top 12 historical natural disasters to strike the U.S. affected Florida, and seven of Florida’s most damage-causing hurricanes occurred in a seven-year period. While we’ve been lucky enough to have six consecutive hurricane-free years, luck has a way of running out. That is what is driving discussions and decisions to shrink both of the state-run insurance programs before a big storm reminds us that ignoring the past is no way to plan for the future.

Luck is not a business strategy, as the head of Florida Hurricane Catastrophe Fund (CAT Fund) knows. Jack Nicholson notes that, when a major hurricane strikes, even cooperative, willing investors will bring in no more than $8 billion in bonds to meet the CAT Fund’s current obligation of $18.4 billion. The Cat FUND expects to have around $8 billion in cash, but there’s no way today’s world financial markets would find investors willing to buy nearly $11 billion in bonds to close the gap.

With a smaller CAT Fund, insurers would make up the difference using reinsurance in the private market, rather than buying it from the state. That costs more, because reinsurers provide claims-paying capital upfront, so the fees would be passed on to consumers. But paying a little more now is better than risking unpaid claims after a storm while paying a lot more in the future.

Tempers understandably flare with any talk of property insurance rate increases, so let’s sum up in one four-letter word what is propelling these reform efforts: debt.

Financing future storms with debt seems popular with people who are getting lower rates today. That tune changes when the bill comes due, including the bill we are still paying from Hurricane Wilma in 2005. Insurance claims drive insurance premiums. If sufficient money is not available the year it is needed, the two state-run insurance programs collect it on the back end for as long as necessary. “Pay it forward” is what the private market is required to do; “pay it backward” — year after year — is the way the state insurance programs run, by design.

This year, policymakers are considering ways to reduce the size of Citizens and gradually shrink the CAT Fund. Any effective solution must face reality and directly acknowledge the risks we all face from betting on quick bailouts from private insurers, who then are allowed to add an assessment for this to your property, auto, business and boat insurance policies.

Florida has been betting its future economy for a dangerously long time, and what was once politically popular will prove disastrous when the wind blows. The danger signal over financing catastrophes with money the state does not have is a real alarm, not a false alarm. It’s time to heed it before we wish we had.

ABOUT THE AUTHOR
Lynne McChristian is the Florida representative for the Insurance Information Institute. Contact her at lynnem@iii.org.

http://www.tallahassee.com/article/20120220/OPINION05/202200306/Lynne-McChristian-insurance-our-good-luck-will-run-out

Bradenton Herald
By Josh Salman
February 15, 2012

MANATEE — State lawmakers hope to bring some stability to Florida’s insolvent home insurance industry by cutting down the size of its biggest player and public enemy No. 1: Citizens Property Insurance Corp.

A bill that swept through the Florida House last week will downsize the mega state-run insurance carrier by transferring some of its policies to secondary “surplus lines,” which aren’t controlled by the Office of Insurance Regulation like the state’s primary carriers.

Opponents fear the measure will open the floodgates to companies that have no barriers when upping rates on unsuspecting policy holders.

But bill sponsor, Rep. Jim Boyd, R-Bradenton, said he has included safeguards to ensure participating surplus lines are financially sound.

He says the move is essential to restoring competition and protecting customers now covered by Citizens — a financial ticking time bomb.

“The size of Citizens is a huge financial burden hanging over every Floridian’s head,” said Boyd, who also owns an insurance company. “One day we’ll have to pay for it.”

Growing at a pace of more than 1,000 new policies a week, Citizens has become the state’s largest property insurance provider with nearly 1.5 million policy holders.

State laws carry a provision that guarantees every Floridian the right to insurance, and as other recession-battered companies pull out of the Sunshine State all together, Citizens has become the default carrier.

The problem is the company will have to turn to the bond market to pay off its claims should a catastrophic storm rip though Florida — leaving homeowners on the hook, experts predict.

That’s after a 45 percent assessment all Citizens policy holders are subject to pay when they file a claim.

The same risk forced nearly a dozen property insurers to seek bankruptcy over the past four years, while others have shrunk their client base or left Florida, state records show. All of this has come without one major storm.

Most insurance agencies throughout the Manatee-Sarasota area support the bill. They’re begging for any options to offer their customers other than Citizens.

“Citizens has grown out of control,” said Andy Gregory, president of Des Champs, Gregory and Hayes Insurers in Bradenton. “We have to start somewhere. If surplus lines have the money and they’re capable, we might as well let them play too.”

Under the bill, which was approved through a 66-48 House vote, some Citizens policy holders will be automatically passed onto surplus lines unless they opt out within 30 days.

The new coverage must be similar to what’s currently provided by Citizens, and consumers unhappy with their new carrier can return at any time.

Surplus lines looking to pick up new policy holders also must carry at least $50 million in surplus capitol, a strong industry rating and enough resources to survive two hurricanes, the measure states.

Opponents argue that’s not enough.

They fear House Bill 245 ultimately will result in higher premiums across the board from a proliferation of unregulated carriers that can raise rates by any amount without control.

And if surplus lines become insolvent, the state currently offers no protection to policy holders who have filed a claim, said Sean Shaw, founder of Policyholders of Florida, an industry watch association.

“This is a bad bill,” he said. “A lot of people will get this notice in the mail, and because of all the negative attention about Citizens, they’ll think it’s a good thing. Then, when it comes time for a new policy, the rates will go through the roof. These are very dangerous deals. I don’t think people know what they’ll be signing.”

Most industry experts, however, believe the surplus lines actually are in better financial shape than most primary carriers.

They also predict competition will keep rates low. If a surplus line insurer raised its rates three-fold after just one policy, consumers will return to Citizens, whose rates are controlled by the state.

A Senate companion measure required for the House bill to become law has one more committee to clear before it hits the floor for a vote.

“The size of Citizens has always been a good measure of how healthy the market is, and when you see it growing like crazy, it’s not a good sign,” said Don Brown, former chairman of the Florida House Insurance Committee, who now travels the state to discuss the industry. “This gives consumers one more option.”

Josh Salman, Herald business writer, can be reached at 941-745-7095.

http://www.bradenton.com/2012/02/15/3874565/bill-aims-to-shrink-citizens.html

Tallahassee Democrat
By Bill Newton
February 8, 2012

Florida’s insurance consumers face new risks from our homeowner insurance system — some well known, and some that most people haven’t heard about.

Our insurance companies, including Citizens Property Insurance Corp., are supposed to remain solvent even when a big storm hits. For monster or multiple storms, the state Catastrophe Fund also kicks in, using money it has built up in years with no storms. If there still isn’t enough to fund obligations, the state would try to borrow enough to cover claims on both Citizens and the Cat Fund, backed by its ability to make assessments on most insurance policies statewide. Because of the new economic world, that may no longer be possible, possibly leaving many homeowners stranded.

We have to fix this problem. House Bill 833 and Senate Bill 1372 will diminish these risks, while keeping the cost to ratepayers reasonable. Based on a proposal from Cat Fund Chief Operating Officer Jack Nicholson, the Florida Consumer Action Network (FCAN) believes these consumer-friendly bills are a necessary step, as long as the cost to homeowners remains low.

The Cat Fund recently announced it could face a shortfall of $3.2 billion — or more. If the Cat Fund is unable to borrow enough to pay its obligations after the next big hurricane, the consequences for families and businesses statewide would be devastating. Even if the Cat Fund succeeds in borrowing enough to pay claims on a smaller storm, Floridians statewide will be required to pay assessments on their homeowner, renter and automobile policies for years to come, as we are now paying for the storms of 2005.

There’s a better way to handle it.

We must spread Florida’s hurricane risk beyond our borders through private reinsurance. We should rely on an industry that is willing and able to financially handle storm risk. The Cat Fund’s protection is dangerously limited, so putting Florida on more sustainable, financial footing should be the top priority of all our elected officials.

We have insurance so we don’t have to take our chances with hurricanes and other risks. While Mother Nature has been kind to us the past few years, the dangers of relying on borrowing funds to rebuild our state in the wake of a big hurricane are all too real. These bills represents an incremental, measured path to smart reform.

Business organizations, nonprofits and charities have been outspoken with regard to reforming the Florida Hurricane Catastrophe Fund. It’s time for Florida consumers to embrace this need for change as well. FCAN does not normally support rate increases, but we feel this one would be responsible. On behalf of FCAN, I hope the Florida Legislature enacts HB 833 and SB 1372 this session. The task at hand is imperative to the well-being and financial security of our state, including Florida consumers.

Bill Newton is executive director of the Florida Consumer Action Network. Contact him a billn@fcan.org.

http://www.tallahassee.com/article/20120209/OPINION05/202090306/Bill-Newton-Fix-CAT-Fund-lower-risks

Florida Voices
By Eli Lehrer
February 7, 2012

The 2012 Florida Legislature has some big items on its agenda. Before it adjourns in March, it will have to close a huge budget gap, draw new legislative and congressional districts, and resolve tough battles over education funding.

Yet even as these issues dominate headlines, the state’s dysfunctional property insurance system — particularly the enormous liabilities it places on Florida’s taxpayers — ought to be near the top of the Legislature’s agenda.

Indeed, unless lawmakers act quickly to change things, one major hurricane or a series of smaller storms could leave the state utterly unable to pay any of its bills. This huge risk to the state’s finances stems largely from something called the Florida Hurricane Catastrophe Fund.

The Cat Fund, as it’s popularly known, is a government agency. When insurance companies purchase insurance of their own, it’s known as reinsurance. Florida law requires all companies that sell homeowners insurance in the state to buy reinsurance coverage from the Cat Fund.

Florida’s Cat Fund charges less for this coverage than private reinsurers that do the same thing, and, in theory, property insurers are supposed to pass the savings along to consumers. Despite this, Floridians still pay some of the nation’s highest property insurance rates.

Even worse, the Cat Fund doesn’t have enough money to honor the promises it has made. Right now, it has a little over $4 billion in hard assets to pay liabilities that could approach $30 billion following a particularly bad storm season.

As a result, everyone who has looked at the fiscal situation — even the Cat Fund’s own Chief Operating Officer — has called for significant reforms that would drastically reduce the Cat Fund’s liabilities.

The Cat Fund’s predicament should come as no surprise; it can’t possibly maintain sound fiscal footing while charging insurers less than private reinsurers charge for the same product.

Some background on reinsurance explains why. A private reinsurance company that operates worldwide can spread its risks. Not only could it insure against hurricanes in Florida, but it might also cover flooding in Europe, earthquakes in Asia, and industrial accidents in Brazil.

Because these events will almost never happen at the same time, the company can survive and earn a profit from one type of coverage even while paying out huge claims on another. Thus, a more diversified private reinsurer can almost always charge less than a less diversified one and make the same (or greater) profits.

However, with its mandate to operate only in Florida, the state’s Cat Fund turns the spread-the-risk principle of insurance upside down. It can’t diversify at all and, even after six nearly storm-free years, it still hasn’t even come close to accumulating enough assets to cover a really awful storm season.

Thus, following a bad storm season, the Cat Fund would have two choices, neither of which is good: It could either default on its obligations, leaving devastated Floridians with no funds to rebuild their homes or, more likely, it could impose massive new special taxes called assessments on almost everyone in the state. These taxes could easily total as much as $1,500 per household, and under current law the Cat Fund could start charging them without any specific legislative approval.

Particularly in these tough economic times, there’s no way that Florida could afford either the taxes or the costs of sheltering thousands of suddenly homeless residents. The state would likely have to petition Washington for a bailout — unlikely in the current fiscal climate — or seek some sort of bankruptcy-like restructuring of its finances overall.

Although immediately eliminating the Cat Fund isn’t practical, the Legislature needs to work to begin significantly shrinking its obligations sooner rather than later.

For three straight years, major reforms of the Cat Fund simply haven’t made it into law, and, because storms haven’t hit, the state has still survived. Unfortunately, the state’s good luck can’t be expected to last forever. Florida can’t afford any further delays.

Eli Lehrer is an Adjunct Scholar of The James Madison Institute, a non-partisan policy center based in Tallahassee, and Vice President of Washington, D.C., operations for The Heartland Institute.

http://www.floridavoices.com/myturn/florida-s-cat-fund-raises-risks-fiscal-catastrophe

Wall Street Journal
By Leslie Scism
February 6, 2012

State-run entities that expanded over the past decade to provide affordable homeowners insurance in hurricane-threatened Florida are in danger of becoming so big they threaten to wreak havoc on the local economy.

Citizens Property Insurance Corp., already the state’s largest home insurer, was growing late last year at a clip of 4,000 policyholders a month. It now has 1.5 million policyholders and a total exposure of $511 billion, about one-quarter of the market.

A sister entity, the Florida Hurricane Catastrophe Fund, is on the hook to reimburse insurers operating in the state up to $18.4 billion for losses they would incur from major storms. It has about $7 billion on its books from accumulated premiums from the past six years, in which Florida has been hurricane-free.

A diverse group that includes Gov. Rick Scott, senior state officials, business groups, a taxpayer-watchdog group and environmentalists is concerned that the state traded protection against natural disaster for possible future financial disaster in allowing the entities to grow as big as they have.

The concern is a major hurricane could cause serious problems: If the two entities were unable to sell post-disaster bonds as planned, some insurers could become insolvent, homeowner claims for repairs could go unpaid, and assessments and surcharges on policyholders statewide could damage the economy.

Many in the group want to grant Citizens greater authority to raise insurance rates, making it a less-attractive option for consumers. Under present law, its rates can’t go up more than 10% a year. In many areas of the state, Citizens charges lower rates than private insurers because the state legislature in 2007 rolled back and froze its rates for three years.

In addition, the group supports pending legislation to ratchet back the size of the Catastrophe Fund, which serves as a reinsurer of sorts to about 170 insurers operating in the state, including Citizens. Reinsurance is coverage insurers buy to help pay claims.

The measure, proposed in a shortened legislative session scheduled to conclude at the end of March, would seek to move the funding of hurricane losses to the global reinsurance market.

At present, the Cat Fund counts on selling municipal bonds, if needed, after a major hurricane or series of midsize ones to raise cash to forward to insurers so they can cut checks to their policyholders. Such posthurricane bonds would be paid off through assessments on property-casualty policyholders of all insurers in the state and many types of insurance, with businesses bearing a significant burden.

“We’re dealing with a house of cards,” Pam Bondi, Florida’s attorney general, said during a November state cabinet meeting with the governor. She was reacting to low estimates received from four Wall Street firms for the Cat Fund’s bond-selling capacity. Those estimates averaged $8 billion, while the Cat Fund then was counting on as much as $11.2 billion in possible bond sales for hurricane claims to honor obligations potentially totaling $18.4 billion.

“We want to right-size the Cat Fund given the current state of the financial markets,” said Jack Nicholson, chief operating officer of the CatFund, in an interview. If the state can’t sell as many bonds as it counts on when contracting to help insurers pay their claims, some insurers in the state would go under and some claims to rebuild homes potentially wouldn’t be paid in full, he said.

The drop in capacity at the Cat Fund proposed in the legislation would likely increase insurance prices by about 10%, officials said.

“People feel the insurance [already] is high-priced, and that’s something they see no end to, and they’re upset about it,” said Thomas Towns, a real-estate agent in Pinellas Park, just north of St. Petersburg.

Still, at least one consumer group has said it would support a modest increase in rates tied to shrinking the Cat Fund. “I can’t be irresponsible” in the fight for affordable insurance, said Bill Newton, executive director of the Florida Consumer Action Network.

Environmentalists, meanwhile, are hoping the measures will slow down development in sensitive areas, and business groups have hailed the reinsurance bill as an important step in reducing what they call “hurricane taxes,” the assessments on consumers and businesses to pay off posthurricane bonds.

Write to Leslie Scism at leslie.scism@wsj.com

http://online.wsj.com/article/SB10001424052970203920204577197372686830732.html

The Miami Herald
By Bill Kaczor
February 3, 2012

TALLAHASSEE, Fla. — Legislation designed to help state-backed Citizens Property Insurance Co. spin off customers to reduce its hurricane risk cleared the Florida House after a heated debate Friday.

The bill (HB 245) would let surplus lines companies, which have unregulated rates, take customers from Citizens if the firms meet certain financial requirements.

Gov. Rick Scott has taken the lead in pushing for the depopulation of Citizens. He contends its rates, limited by law, are artificially low, which could leave nearly all Floridians on the hook if a major storm hits the state.

That’s because Citizens can assess not only its own customers but those of other insurers providing a variety of coverage, including automobile policies, to make up its losses. Created to be an insurer of last resort, Citizens has become Florida’s largest property insurer with nearly 1.5 million customers as private companies have fled the state or downsized because of the hurricane threat.

The bill that passed 66-48 now goes to the Senate where similar legislation hasn’t yet had a committee hearing.

It would let Citizens automatically hand off homeowners and other customers to the surplus lines companies. Customers, however, could opt out of the switch or go back to Citizens later, the bill’s supporters said.

Opponents said customers who get switched would face higher rates and could be left holding the bag if their insurer becomes insolvent and cannot cover claims. That’s because surplus lines are not included in the Florida Insurance Guaranty Association.

“Insolvencies happen. They happen all the time,” said Rep. Rick Kriseman, a St. Petersburg Democrat who opposed the bill.

Kriseman said the guaranty association has paid out $24.2 billion for claims against more than 600 insolvent insurers.

Supporters said surplus lines companies would be required to have at least $50 million in surplus funds to participate in the program and that many are owned by major insurance companies with even greater financial backing.

“They are mainstream participants in the U.S. insurance marketplace,” said Rep. Bill Hager, a Boca Raton Republican and former Iowa insurance commissioner. “They are recognized in the main as stable, good-faith operators.”

Floridians could depend on them in case the state is struck by a major hurricane such as Katrina, which devastated New Orleans, Hager said.

“Katrina’s coming,” he told his colleagues. “You’ll look good when you vote for this. Your constituents will look even better.”

Although the state Office of Insurance Regulation, or OIR, cannot regulate surplus line rates, it does oversee the companies in other ways and can kick them out of the state if they get into financial trouble, Hager said.

That argument did not sway Rep. Evan Jenne, D-Dania Beach.

“OIR stands for the ‘office of industry rubber-stamping,'” Jenne said.

Kriseman also criticized the legislation for having an opt-out rather than an opt-in provision.

“That means we’re asking our seniors, our seasonal residents and our families, who are busy working, to hopefully receive, read and understand the notification letter and then to take the step to reject the switch if they don’t want it,” he said.

http://www.miamiherald.com/2012/02/03/2623408/fla-house-oks-alternative-hurricane.html

Pensacola News Journal
By Erin Kourkounis
February 2, 2012

Florida’s Severe Weather Awareness Week continues through Friday.

Severe Weather Awareness Week is an opportunity for Floridians to learn about the various weather hazards that frequently impact the state and how families and businesses can prepare for these natural events, state officials said in a news release.

Each day focuses on a specific weather event. Today’s focus is hurricanes and flooding.

Florida has a long history of hurricanes. Records indicate that approximately 110 hurricanes and almost 200 tropical storms have impacted the state since 1851.

The unique location of Florida in the subtropics makes it vulnerable to tropical storms and hurricanes, and the relatively flat terrain can also make it susceptible to flooding. Florida is surrounded by very warm waters, which breed and support hurricanes: the Atlantic Ocean to the east, the Gulf of Mexico to the west and the Caribbean Sea well to the south.

DID YOU KNOW? No other state in the country has more hurricane landfalls per year on average than Florida does. Nearly 40 percent of all hurricanes that strike the United States make landfall in Florida.

The official North Atlantic Ocean hurricane season begins June 1 and continues through Nov. 30. The typical peak is during August and September. It is important to remember that it is possible for Florida to be impacted by tropical weather systems outside of hurricane season as early as May and as late as December.

Residents and visitors need to plan ahead and remain ready for possible hurricane impacts.

The 2011 season recorded 19 named storms. Seven of those storms developed into hurricanes, four of which were classified as major hurricanes. For the sixth consecutive year, Florida has escaped major impacts from hurricanes. However, Floridians know that it only takes one storm to affect our state for long lasting impacts to be felt. This is why having a family and business emergency plan and disaster supply kit ready year-round is extremely important in Florida.

Meteorologists use the Saffir-Simpson Scale to rate the strength of a hurricane based on wind speed. When a storm’s maximum sustained winds reach 74 mph, it is considered a hurricane. When sustained wind speeds reach 111 mph, the storm is considered a major hurricane. When a tropical system approaches the state, The National Hurricane Center will issue watches and warnings.

• A Watch is issued 48 hours in advance of the time dangerous winds are possible within the specified area. A watch should trigger your family’s emergency plan, and protective measures should be initiated.

• A Warning is issued 36 hours prior to the time when damaging winds are expected. Once a warning has been issued, your family should be in the process of completing protective actions and deciding the safest location to be during the storm.

Your main protection against hurricanes is to be prepared and have a plan. Hurricane-force winds can easily destroy poorly constructed buildings and mobile homes. For your hurricane emergency plan, first determine whether you live in an evacuation zone. Your local emergency management office can provide this information. If you do live in an evacuation zone, plan when and where you will go to pass the storm, and keep emergency telephone numbers handy. Second, have a disaster supply kit ready with enough provisions to last 3 to 5 days.

While hurricanes are known and feared for their ferocious winds, historically it is the water that causes most of the deaths in hurricanes. About 90 percent of all hurricane fatalities occur from drowning in either storm surge or freshwater flooding.

Flooding is a serious concern in Florida since it can happen anywhere and at any time. Effects from flooding can be localized, impacting just a few streets, or very large, affecting multiple cities, counties and even whole states. Most flooding related deaths in the United States are due to people driving cars into flooded areas. Once a vehicle begins to float, the situation for its occupants becomes dangerous and often deadly.

DID YOU KNOW? Just 6 inches of fast-moving floodwater can knock you off your feet and 2 feet of water can sweep an SUV off a road.

Residents should be aware of their location with respect to flood-prone areas and know evacuation routes. Using extreme caution is urged when driving in heavy rains, especially when water covers the road. Because it is difficult to determine the depth of water or the condition of the road under the water, if you come to a flooded road, remember the phrase “Turn Around, Don’t Drown”.

National Flood Safety Awareness Week is March 12 -16. National Hurricane Preparedness Week is May 28-June 1. For more information about hurricanes, flooding and what you can do to protect yourself and others, visit www.nhc.noaa.gov, http://www.weather.gov/floodsafety/ or www.FloridaDisaster.org.

Friday’s topic is temperatures extremes and wildfires.

For more information on the Florida Division of Emergency Management and to GET A PLAN!, please visit: www.FloridaDisaster.org. Follow us on Twitter at www.Twitter.com/FLSERT and on Facebook at www.Facebook.com/FloridaSERT.

http://www.pnj.com/article/20120202/NEWS01/120202013/Florida-leads-nation-hurricane-landfalls

TheLedger.com
By Steve Pociask
January 30, 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, Florida Hurricane Catastrophe Fund leadership 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, threatening numerous insurers with insolvency and consumers with new costs increases.

The CAT Fund 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 state Sen. J.D. 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 because of the structure of the fund and benefit consumers statewide. Both bills are based on a proposal from CAT Fund Chief Operating Officer and are necessary for consumer protection.

Businesses and many consumers statewide have suffered from the risk of insurer insolvency, with roughly a dozen insurers facing liquidation in recent years, despite the absence of hurricanes. Also, Floridians 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 survey the American Consumer Institute conducted recently 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 that fixing the CAT fund is necessary and that these proposals deserve immediate legislative attention.

[ Steve Pociask is president of American Consumer Institute Center for Citizen Research, Tallahassee. ]

http://www.theledger.com/article/20120130/COLUMNISTS03/120129257?p=1&tc=pg

the Current
By Gray Rohrer
January 24, 2012

A bill to allow private insurance companies more time to recoup losses from customers in the aftermath of a storm passed swiftly through a House panel Tuesday. Under HB 1127, nearly all regular assessments on insurance policies after a catastrophic storm — which are due to state-backed Citizens Property Insurance Corp. 90 days after they are assessed — are transferred to emergency assessments, which can be recouped over a longer period of time.

Supporters of the bill say it will make the Florida property insurance market more attractive to out-of-state capital and reduce the short-term exposure of the private market. But another bill, HB 833 — designed to reduce back-door assessments on policyholders by reducing the amount of reinsurance backed by the state, is drawing complaints from Citizens and private insurers.

They contend that because the bill shrinks the size of the Florida Hurricane Catastrophe Fund, or Cat Fund, and increases the amount of co-pays for private insurers, it will force them to raise their premiums. That means Citizens, whose rate increases are capped at 10 percent annually, would be more attractive to consumers, the exact opposite of the intent of Gov. Rick Scott and other elected officials seeking to bring more private insurance capital to Florida.

Both HB 1127 and HB 833 were discussed in a workshop meeting of the House Insurance and Banking Subcommittee last week. Whereas HB 1127 passed through the committee Tuesday with two negative votes, HB 833 did not come up for a vote.

Rep. Bill Hager, R-Boca Raton, who is sponsoring the bill, said he doesn’t agree with the contention of some private insurance companies that say Citizens must be reformed along with the Cat Fund, but is willing to make changes to the legislation. Regardless of any potential amendments, Hager said, the bill should move forward because the Cat Fund faces a potential $3.2 billion shortfall if a catastrophic storm hit the state.

“The Cat Fund bill can, in fact, move forward with or without changes to Citizens,” Hager said. “I think I’ll come forward with modifications of the bill. I may have something that deals with a piece of Citizens, but I think it’s wrong for us to wait, particularly with the start of hurricane season five months away.”

Citizens itself is also critical of HB 833. In a narrow vote last month, its Board of Governors voted to draft a letter noting its concern.

“We have concerns about enacting into law reductions to the size of the FHCF and the potential impact it could have on Citizens’ policy count as the result of reduced depopulation activity,” the letter reads in part.

Although there has been comparatively little talk in the Senate about the potential Cat Fund shortfall, Sen. JD Alexander, R-Lake Wales, sponsor of the companion SB 1372, said he won’t wait for other reforms to Citizens before moving forward.

“We’ve been talking about some possible changes to it to accommodate some of those concerns. My ultimate goal is to reduce the risk. Quite frankly, when you’re going in the wrong direction, any step in the right direction is helpful,” Alexander said.

Reporter Gray Rohrer can be reached at grohrer@thefloridacurrent.com.

http://www.thefloridacurrent.com/article.cfm?id=26283283

Sunshine State News
By Jim Turner
January 20, 2012

For reform of Citizens Property Insurance Corp. reform, even tiny steps can be a big deal.

Between Jan. 1, 2011, and this week, the state-backed Citizens Property Insurance Corp. is down 18 policies.

With more than 1.47 million polices now being handled by the “insurer of last resort,” 18 might not sound like a lot. However, for state officials who have been trying to direct a vast number of those policies toward private insurers, the reduction — no matter how slight — is viewed as good news.

Scott Wallace, the departing president of Citizens, told members of Florida’s Cabinet this week the reduction “is a far cry better than growing by 1,000 policies a day.”

Wallace, who is leaving Citizens in April after six years, said the company is in “best shape ever” financially and in terms of management.

The goal for Citizens is to shave 7 percent of its risk, including $1 billion in coverage from properties that overlook the Atlantic Ocean and Gulf of Mexico, reducing the number of overall policies from 1.5 million to 800,000.

With storms and other coverage, such as sinkholes, Citizens’ customers have the state — primarily its taxpayers, regardless of whether they are Citizens’ customers — facing exposure of up to $500 billion in potential claims.

Wallace credited the reduction in part to an effort announced in December that:

— Set a $1 million coverage liability limit for coastal accounts, down from $2 million.
— Imposed a mandatory 10 percent sinkhole deductible.
— Reduced personal liability coverage from $300,000 to $100,000.

Meanwhile, the Citizens board of governors is also supporting a number of bills now before the state Legislature:

SB 1784 by Sen. Alan Hays, R-Umatilla, would discontinue policy discounts, prohibit Citizens from accepting applications from nonresidential commercial risks, and allow Citizens to set residential rates deemed more appropriate by the corporation. The bill would allow policies not to include screen enclosures or any structure detached from the house.

SB 1346 by Sen. Steve Oelrich, R-Gainesville, reduces from 6 percent to 2 percent the amount of the projected deficit in the coastal accounts.

SB 578 by Sen. Garrett Richter, R-Naples, allows Citizens to release some information from underwriting files and confidential files to companies that are considering writing or underwriting risks.

Gov. Rick Scott told reporters after Wednesday’s Cabinet meeting the 18-policy reduction shows “we’re making progress in Citizens.”

“We’re starting to depopulate, it’s not growing, so I think that’s all good,” he added. “It would be nice to have everything happen in a day, but it doesn’t seem to work that way.”

Reach Jim Turner at jturner@sunshinestatenews.com or at (772) 215-9889.

http://www.sunshinestatenews.com/story/citizens-property-insurance-sees-big-news-small-drop