Don Brown

the Current
By Gray Rohrer
January 19, 2012

Legislation that would all but eliminate regular assessments on homeowners’ policies in the aftermath of a catastrophic storm easily moved through the Senate Banking and Insurance Committee Thursday, passing with a unanimous vote.

After a damaging hurricane, customers of state-backed Citizens Property Insurance receive assessments on their premiums to recoup losses. If the damage exhausts that 15 percent assessment, 6 percent regular assessments are placed on the policies of non-Citizens customers. If more money is needed, emergency assessments are placed on Citizens and non-Citizens policyholders.

SB 1346 would eliminate the regular assessments for personal lines and commercial lines accounts, and reduce the regular assessment for coastal accounts from 6 percent to 2 percent. Instead, the money would be recouped from the emergency assessments, which can be gathered by private insurance companies over a longer period of time than regular assessments, which must be collected within 90 days.

Former Rep. Don Brown, a senior fellow with the Heartland Institute, a free-market think tank supporting the bill, said that after six straight years without a major hurricane, Citizens’ $6 billion surplus means it doesn’t need to recover capital as quickly after a storm.

“It’s just simply not necessary anymore,” Brown said.

The House Insurance and Banking Subcommittee discussed the companion bill, HB 1127, on Tuesday, but is yet to vote on the bill. It is scheduled for three committee stops in the House, but has just one more in the Senate before heading to the floor.

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

http://www.thefloridacurrent.com/article.cfm?id=26216655

CaptivaSanibel.com
By Christopher W. Heidrick
January 19, 2012

Citizens Property Insurance Corporation, Florida’s state-owned insurer, has recently received approval from the Florida Office of Insurance Regulation to stop insuring homes with limits exceeding $1,000,000. The Company stopped accepting new business applications for these high-limit policies on January 18, 2012 and will begin non-renewing in-force policies on May 1, 2012.

Citizens was created in 2002 as the “insurer of last-resort” for personal and commercial property. Due to artificially low rates and a lack of private insurance capacity for low-value homes, the number of policyholders has doubled in the past two years and Citizens continues to gain about 1,000 new policyholders every day. Governor Rick Scott has been vocal about his desire to return Citizens to a true insurer of last-resort. To that end, this is the first of several reforms that are being discussed.

Affected policyholders should have little trouble finding coverage in the private market, though rates and deductibles will be higher. Private market rates and terms will vary widely between insurers and properties. Homes with hip-shape roofs, impact glass/shutters and hurricane straps will do better than those without these features. Policyholders should expect to be contacted by Citizens and your Agent to discuss alternatives well in advance of the renewal date.

If you have a mortgage or equity line on your home, it is important to ensure replacement coverage is obtained on or before the date your Citizens policy expires. Otherwise, the bank will place very expensive forced placed coverage for you until you obtain your own policy. In general, this is a meaningful change, but it is in no way a “knockout blow” for high value homes. Lee County currently accounts for about 4% of Citizens’ 1.45 million homeowner policies state-wide. In our region, many owners of these homes began self-insuring about three years ago when Citizens first required shutters and impact glass for all homes with limits exceeding $750,000. Coverage still remains available in Southwest Florida and capacity will likely increase. Adequacy of private market capacity is a standard consideration of the Office of Insurance Regulation any time an insurer requests to reduce its business or exit the market. However, this is likely one of several changes intended to shrink Citizens’ business and restore the company to a true market of last resort.

This week Sen. Alan Hays (R Umatilla) introduced SB5784 which would further reduce eligibility, restrict the coverage offered by Citizens (making its products less attractive) and increase premiums. While this bill is unlikely to pass during an election year, Gov. Scott has instructed Citizens to search all alternatives to reduce its size that do not require legislative approval.

http://sanibel-captiva-islander.com/page/content.detail/id/518685/Change-and-Citizens-Property-Insurance-Corp-.html?nav=5047

The Insurance Journal
By Michael Adams
January 18, 2012

Florida’s largest homeowners’ insurer has set the goal of moving at least $1 billion in risk back to the private capital markets while looking to lawmakers to make statutory changes that will assist the insurer in its depopulation efforts.

Speaking before the Florida Cabinet, outgoing Citizens Property Insurance Corp. President and CEO Scott Wallace said the insurer is intent on focusing all of its efforts on depopulating the insurer and reducing the exposure it represents to all Florida policyholders.

Currently, the insurer has 1.47 million policies in force with a total exposure of a half trillion dollars.

“We are doing everything we can as quickly as we can to focus on our goals,” said Wallace. “Clearly, there is a lot of work to be done to reduce the size and significance of Citizens.”

Wallace said the insurer is taking several approaches to achieving depopulation and reducing its financial exposure.

The step with the most immediate impact could be if Citizens is successful in transferring at least $1 billion in risk back to the private capital markets.

Following last year’s successful purchase of $575 million in private reinsurance and $900 million in pre-event catastrophic bonds, Wallace said the Citizens has set a goal of transferring at least $1 billion in exposure back to the private capital markets by the end of the year.

Meanwhile, the insurer has implemented some coverage reductions.

As of Jan. 1, the insurer is no longer covering properties valued at more than $1 million in its coastal account. It has also implemented a 10 percent mandatory sinkhole deductible and reduced its personal liability coverage from $200,000 to $100,000. Other coverage changes are slated to be implemented later this year.

On the depopulation front, Wallace said that 17,000 policies are slated to be removed from the insurer on Feb. 14, by the Boca Raton-based Peninsula Insurance Co.

Citizens has reactivated its depopulation committee, which will make a series of recommendation at the insurer’s board of governor’s meeting next month.

The committee is expected to consider eliminating ceding commissions and evaluating methods to package Citizens’ policies so they are more attractive to private insurers.

Chief Financial Officer Jeff Atwater questioned whether there is any other interest from private insurers and what concerns are they expressing.

Wallace said the insurer is in the preliminary stages of meeting with some investors, but it is going to take time for the market to be willing to take on large numbers of policies.

When questioned why by Atwater, Wallace cited that in effect, it will take national companies time to trust the state’s regulatory environment. In the past several years, insurers have seen changes such as a Citizens’ rate freeze, which was later lifted in favor of a 10 percent annual rate increase.

In 2008, private companies assumed 385,000 policies from Citizens but since then the number of assumed policies has dropped significantly from 150,000 policies in 2009 to just 59,700 policies in 2010.

“The one concern I hear in the marketplace is the lack of consistency through the years,” said Wallace.

Citizens is supporting a number of reform bills currently being considered by state lawmakers, including one that is moving quickly that would allow surplus lines carriers to remove policies directly from Citizens. The bill is being backed primarily by GeoVera Specialty Insurance Co., which has operated in the state since 1994 and currently has 30,000 policyholders around the state. The company primarily offers residential homeowners polices and earthquake coverage in the southeast and Midwest.

Citizens is also supporting several other bills that have yet to gain much traction in the legislature.

http://www.insurancejournal.com/news/southeast/2012/01/18/231560.htm

Property Casualty 360
By Phil Gusman
January 16, 2012

Economic risk is the top concern on business professionals’ minds, according to a survey of Allianz Global Corporate & Specialty risk experts, but the same professionals say businesses are underestimating cyber risks.

The AGCS survey of 153 of the company’s risk experts was designed to gauge the mood of business clients toward global risks. In the survey, 21 percent of respondents mentioned the economic situation as one of the top-three risks on the minds of clients. Business interruption was the next most-frequently mentioned risk, cited by 14 percent of respondents, and 9 percent mentioned natural catastrophes.

Rounding out the top-10 were legal/regulatory risks, reputational risks, business-inherent risks, political risks, staff-related risks, environmental risks and fire risks.

Cyber risks did not crack the top-10 list, and the ACGS professionals say the most underestimated risks relate to IT. “Despite a broad awareness of the increasing risk, only 1 percent of risk experts say that their clients are concerned with cyber risks,” an analysis of the survey says. “Cyber risks are characterized by constant innovation and change and are therefore difficult to control.”

And the issue with cyber risks extends beyond just IT systems, according to Jose Fidalgo, AGCS risk consultant, liability. “After a claim notification we see very often that we are not dealing with a pure system failure but that there was a lack of understanding around the entire process,” he says in the analysis. “We have to continue putting a lot of emphasis on education and know-how transfer. IT risks are quickly evolving and becoming more complex by the minute.”

Regarding the top-cited risk, the economic situation, Michael Heise, Allianz group chief economist, says in the analysis, “In the current climate we have all become acutely aware of the pervasiveness of economic risk.”

He adds, “Nervousness and volatility in the financial markets eventually undermine confidence and business activities in the real economy, which in turn further unsettles investors and the markets.”

On business interruption, AGCS experts say vulnerable supply chains should be their clients’ highest priority, even though the economy is the risk on most of their minds.

Paul Carter, head of property risk consulting at AGCS, explains in the survey analysis that the increasing trend to source globally has reduced costs along the supply chain, but has “significantly increased risk of disruption within companies’ overall supply chains.”

He notes, “The very flexibility that provides the supply chain with its cost advantages has also caused its inherent vulnerability.”

For the third most-cited risk, natural catastrophes, AGCS says concern among businesses in this area is actually lower than expected given the high-profile Asia-Pacific catastrophes in 2011. AGCS also says global trends like urbanization and coastal/flood-plain development increase overall losses from windstorms and floods.

Michael Bruch, a risk expert from AGCS Risk Consulting, says, “In today’s interconnected world, we cannot see the risk of natural catastrophes in isolation, but have to ask ourselves what happens when disaster strikes and what kind of knock-on effects this may have in other parts of the world.”

http://www.propertycasualty360.com/2012/01/16/businesses-see-economy-as-greatest-2012-risk-under

SunSentinel.com
By David Hart
January 15, 2012

Florida avoided hurricane landfall for an unprecedented sixth consecutive year. While the state’s good luck won’t last indefinitely, 2012 brings the opportunity to reform Citizens Property Insurance Corporation and the Florida Hurricane Catastrophe Fund before the next storm causes a collapse of these government-run entities.

Floridians are still paying for the storms of 2004 and 2005. If a major storm or series of storms hits Florida this year, future “hurricane taxes” could amount to over 50 percent of insurance premiums each year for up to 30 years and will be financially devastating for the business community. Also, Citizens Insurance and the Cat Fund will not have the capacity to pay claims for future storms and will rely entirely on taxpayer-backed debt — further threatening Florida’s economy.

Cat Fund Chief Operating Officer Jack Nicholson and many of Florida’s elected leaders agree it’s important to reduce the size of Citizens and scale back the Cat Fund. From increasing the Citizens Insurance rate glide path to reducing the capacity of the Cat Fund, Florida must create an environment where insurance premiums reflect exposure to risk.

Rep. Bill Hager, R-Boca Raton, and Sen. J.D. Alexander, R-Lake Wales, have filed legislation, HB 833 and SB 1372, which is a balanced approach to reforming Florida’s exposure. A modest increase in current rates is far less risky than the devastating economic impact from a massive “hurricane tax” or potential insurer insolvencies that Florida will face in the wake of the next major storm.

The Florida Chamber of Commerce urges policymakers to consider this important legislation to fix Florida’s broken insurance system.

David Hart is the executive vice president of the Florida Chamber of Commerce.

Scott Johnson Blog
January 12, 2012

Ever hear the story about the spoiled teenager who found a set of keys to a shiny new Corvette hanging on the Christmas tree? Instead of politely saying “Gee, mom and dad, thank you for this great new car”, he complained about needing more allowance to pay for the gas.

Despite deep divisions on how to solve the “Citizens problem”, everyone understands a surging policy count is less than desirable. Predicted to pierce 1.65 million near term, Citizens growth reflects 2007′s legislative myopia and it foreshadows darker economic days for those who can least afford it; many of them insured in Citizens.

In fact, nobody I’ve ever talked to admits to wanting Citizens to grow. Albeit for the usual selfish reasons, trial lawyers don’t want policies there–no bad faith and less coverage for sinkholes. As expected their fronting groups share the same opinion.

Southeast lawmakers lament Citizens growth, too, and even Senator Mike Fasano, whose district contains the only Florida county (Hernando) with a majority of households insured in Citizens, recognizes the danger its unabated growth creates for our state’s economic future.

None the less it was bound to happen. Sooner or later someone with a computer and a barrel of ink was eventually going to write that “growing” Citizens might be a “good thing”! It was Michael Mayo a columnist for the Ft. Lauderdale Sun Sentinel in Citizens Insurance Keeps Growing, and Maybe That’s a Good Thing.

And, guess what? It’s apparently because he doesn’t want to pay more! About Citizens rates being lower than private companies Mayo said… Geez, if the rates I’m already paying are competitive (about $4,000 a year for a small home, not including federal flood insurance) I’d hate to see what non-competitive is.

Non-competitive, Mr. Mayo, is what private companies charge compared to Citizens; which includes surcharges to enable you to keep paying less than you should.

Mayo again: The problem for many homeowners, especially in South Florida, is that there are no options besides Citizens. I’m among the 352,000 homeowners in Broward and Palm Beach counties stuck with Citizens because nobody else will write a policy for my 52-year-old home east of Interstate 95.

I don’t know how far east of I-95 Mayo lives or what condition his 52-year old home is in. I do know I live nearly 500 miles from Ft. Lauderdale in a home that’s only 20 years old with a new roof that cost $17,000 and I’m being assessed to help cover his household expenses. While I, and others among the vast majority subsidizing Mayo deserve to be upset, it would be a lot easier to swallow if he didn’t whine that it wasn’t enough.

I’m sure the vast majority of Palm Beach and Ft. Lauderdale heads of household, including those who can’t even afford homes, are with me on this. With the payment of every auto premium they grow less tolerant subsidizing coastal mansions.

Under the current Citizens 10% cap research shows Broward county receives over $62 million in implied subsidy from the rest of the state. Palm Beach nearly $58 million. And the disparity continues to grow, in part, because Citizens rate requests are less than 10% in most areas; ostensibly to help the Mayo’s of this world.

Doesn’t mean some people don’t deserve help. According to The Florida Catastrophic Storm Risk Management Center report, the problem with HB-1A was that it helped those who don’t need it at the expense of those who do.

Keep in mind, the self-fulfilling nature of Mayo’s prophecy. In southeast Florida he says there are no options besides Citizens. You think? Could it have something to do with opinions like his, that thwart Citizens rates from being about 50% higher, where they should be.

He blames insurance companies who left Florida or who don’t want to insure his home. But, why would they allocate resources, including expensive, non-refundable reinsurance premiums, to sell policies where the state insurer (with guaranteed solvency & better coverage) undercuts their rate by half? Not State Farm. Not Allstate. Not any company with a sane business model.

Next, in what is the epitome of non-sequitur, Mayo complains about those who complain. He calls them/us/you/me “free-market ideologues” who shouldn’t “demonize” Citizens, because; and, you’ll love this:

The company is profitable and healthy, with an estimated $5.6 billion surplus in reserve. That’s more than the combined reserves of all the other private property insurers in the state.

Okay, research isn’t Mayo’s forte. But, how much effort is needed to find out that about 1/3rd of Citizens surplus came from assessments on those it doesn’t insure. Why didn’t he mention that private carriers often reinsure 90% or more of their 100-year PML. How hard would it have been for a responsible journalist to simply mention that Citizens meager surplus pales against exposure of half a “TRILLION” dollars!

Despite all this, and testament to Mayo’s obvious penchant to “occupy”, he claims to trust the government insurer more “…than the untested upstarts and fair-weather giants in the private market.

Translation: “I enjoy Citizens subsidized lower premiums and better coverage whether I deserve it or not and regardless of who else it hurts!”

What a jerk!

Frankly, the Michael Mayo’s of this world may never care to see the light, but…wouldn’t it be nice if just once, instead of complaining about their allowance, they just said “thank you” for the car?

http://johnsonstrategiesllc.com/a-simple-thank-you-would-be-nice

The Tallahassee Democrat
By Tom Feeney
January 12, 2012

For the first time in years, moving vans are bringing families into our state at a greater rate than they are moving people out. Florida’s unemployment rate continues to creep downward, as more private-sector jobs are created. Both signal that Florida’s economy may be turning the proverbial corner and demonstrate that the policies put into place by Gov. Rick Scott, the Cabinet and legislative leaders are slowly, but surely, producing positive results.

However, with nearly 1 million of our fellow Floridians unemployed, there is still more that can and must be done to re-establish Florida as the national leader in job creation and economic prosperity. And the key lies with Florida’s businesses. A healthy economy and a stable job market are intrinsically tied to the vibrance of our existing businesses and our ability to attract new business to the state. Policies that support businesses and make Florida the absolute best place in the country to do business will accelerate our economic rebound and put people back to work.

When businesses thrive, our state and its citizens thrive. It is not a novel philosophy, but it is a proven philosophy and one that goes to the heart of Associated Industries of Florida’s (AIF) core mission. Since 1920, we have served as the “Voice of Florida Business” in Tallahassee and our nation’s capital by representing employers on the issues most important to the business community. We defend the principles of the free-market system and advocate for business-friendly proposals, because we know a robust state economy relies on it.

With the 2012 Legislative session in full swing, Florida’s business community and lawmakers have an opportunity to advance policies that will put Florida on track to becoming the place to do business.

One of the greatest challenges facing Florida employers is the growing cost of doing business.

Employers continue to shoulder the burden of increased labor costs that have the potential to grind hiring to a halt or, worse, cause businesses to eliminate jobs. This year, employers will see a major increase in worker’s compensation premiums, and unemployment compensation taxes will more than double without legislative intervention. A legislative fix that closes the drug repackaging loophole in workers’ compensation law will help stabilize and drive down premiums. Additionally, AIF plans to work with lawmakers to pass legislation that lessens the unemployment compensation tax increase to a more manageable level so employers can stay afloat and unemployed Floridians can continue to receive the benefits they need.

To help businesses, and ultimately our entire state, Florida needs a competitive and fair tax structure that encourages business growth, draws capital investment and ensures Florida’s brick-and-mortar businesses are competing on a level playing field. The recent growth of the online retail industry has exposed a flaw in our tax policies, which allows companies that do not have a physical presence in Florida to sell their products without remitting sales taxes to the state. Similarly, online travel companies currently enjoy a special tax advantage that enables them to charge lower room rates than Florida hotel owners who pay their fair share of taxes and employ thousands of Floridians. Bringing equity to our tax structure and ensuring fairness for everyone in the state and international business community is paramount to the success of our free-market system.

Hurricanes — an ever-present threat to our state — also bring the threat of “hurricane taxes” to every employer and citizen in our state. Should a major hurricane hit our state, Citizens Property Insurance Corp. and the Florida Cat Fund — our state-run insurance companies — will be unable to cover the losses to Florida policyholders. The difference will have to be made up by taxes assessed on all insurance policies. AIF supports legislation that reduces our state’s risk and exposure, thereby lessening the potential for unfair hurricane taxes levied on all Florida businesses, organizations and individuals.

While AIF supports honoring Florida’s great traditions, we believe we also should look at new opportunities to expand Florida’s economy. Destination resorts combined with better control of unregulated gambling can bring 100,000 jobs for Floridians and immediately inject $6 billion in capital investment into the state. These new sources of annual revenue can be used to support schools, roads and health care and should be thoughtfully considered by our legislators as part of the formula for expanding our economy and creating jobs.

These are just some of the steps we can take now to cultivate an environment prime for business and job growth.

Florida has the opportunity capitalize on all its strengths — our geography, natural resources and infrastructure — to become the nation’s premier location for business. AIF is committed to leading the way there.

http://www.tallahassee.com/article/20120113/OPINION05/201130321/Tom-Feeney-Business-key-Florida-s-job-growth

The Tampa Tribune
By Bill Newton
January 9, 2012

Florida’s insurance consumers face new risks from our homeowner insurance system — some are well known, and some most people haven’t heard about. Our insurance companies, including Citizens, are supposed to remain solvent even when a big storm hits. For storms of a certain size, or multiple storms, the state Catastrophe Fund also kicks in and uses funds it has built up in years that had no storms. If there 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 their 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 — sponsored by Rep. Bill Hager, R-Boca Raton — and Senate Bill 1372 — sponsored by Sen. JD Alexander, R-Lake Wales — would diminish these risks, while keeping the cost to ratepayers reasonable. Based on a proposal from Cat Fund Chief Operating Officer Jack Nicholson, these consumer-friendly bills are a necessary step, and we support the bills as long as the cost to homeowners remains low.

The Cat Fund recently announced it faces a shortfall of $3.2 billion — or more. If the Cat Fund is unable to borrow sufficient funds to pay its obligations in full 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. There’s a better way to handle it.

Spreading Florida’s hurricane risk beyond our state’s borders through private reinsurance is a step we must take. 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.

Business organizations, nonprofits and charities have been outspoken with regard to reforming the Florida Hurricane Catastrophe Fund and supporting the efforts of Nicholson, Hager and Alexander. It’s time for Florida consumers to embrace this need for change as well. The Florida Consumer Action Network does not normally support rate increases, but we feel this is responsible, as long as the cost to consumers is 10 percent or lower, which we feel is affordable. 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 Florida Consumer Action Network.

http://www2.tbo.com/news/opinion/2012/jan/09/meopino1-keeping-homeowners-insurance-affordable-ar-344951/

NaplesNews.com
By Patrick F. Maroney, Lorilee A. Medders and Charles M. Nyce
Florida Catastrophic Storm Risk Management Center
January 8, 2012

Florida is a laboratory experiment in financing catastrophic risk. This lab has some of the highest insured property value in the U.S. (second only to New York) and more storms blowing through than any other place on Earth.

The experiment has been ongoing in the property insurance market since Hurricane Andrew in 1992. Managing the state’s insured residential property exposure (in excess of $2 trillion) may never be easy, but steps are needed to prevent a natural disaster from becoming a financial one.

Florida policymakers are tasked with making financial preparations for the likelihood of catastrophic storms. To help them, the Legislature tasked the Florida Catastrophic Storm Risk Management Center, housed within the College of Business at Florida State University, to prepare an analysis of Florida’s property insurance market and offer recommendations on how to best correct and stabilize the market.

Three major themes are apparent: The role of residual markets, the need for capital to support Florida’s exposure to hurricanes and the importance of risk reduction through property mitigation.

Many people do not realize Florida is the only state that requires property insurance companies to use simulation-based modeling of hurricanes to predict future loss costs. This puts Florida ahead of its U.S. peers in seeking a forward-looking view of risk, especially since insurance must be arranged in advance of storms and their costs. In recent years, however, Florida, in an attempt to encourage homeowners to reduce their storm risk through mitigation, experimented with price discounts that departed from a true reflection of anticipated loss costs. Most homeowners did not mitigate but property insurance companies’ rates were suppressed. Unfortunately, that was likely a primary factor in pushing national, well-capitalized insurers out.

The private property insurance market is now dominated by smaller Florida-based insurers, many of whom have limited capital and limited business diversification. This has resulted in Florida having the lowest level of capitalization, as measured by policyholder surplus, of any catastrophe-prone state other than Texas. With relatively low capital levels and high concentration of risk in one state, Florida-based companies purchase a lot of reinsurance to pay claims and ensure their solvency after a catastrophe. The problem is that much of the reinsurance they buy is from a state-run entity – the Florida Hurricane Catastrophe Fund (FHCF) – which can potentially run out of money.

Legislative and regulatory intervention enabled both Citizens Property Insurance Corp. and the FHCF to expand, departing from the state’s forward-thinking practices about risk financing and pricing since these state insurance mechanisms get funds to pay claims after a big storm hits. Through a system of assessments, they shift costs from current to future policyholders. This is an imbalance that makes property insurance a challenge for all Floridians.

Citizens now insures more than 1.4 million policyholders, a 42 percent increase since December 2009. And during two of the last three years, the FHCF likely could not have successfully issued bonds sufficient to pay its full potential liabilities. These are significant points since Florida has authorized Citizens and the FHCF to charge post-loss assessments if they do not have sufficient funds to pay liabilities. And, they are not the only entities that can assess after storms. Add in the Florida Insurance Guaranty Association, which pays the claims of insolvent insurers.

Consumers want transparency in property risk financing and to know what subsidies will cost them when state-run funds fall short. To achieve transparency, we recommend first addressing the appropriate mix of pre-loss insurance premiums and post-loss assessments. Strategies to attract financial capital to Florida’s property insurance market and return the FHCF to its original role as a market stabilizer are also imperative for ensuring sufficient capital. Speeding the glide path for Citizens’ rates is another recommendation to protect all policyholders from assessments. Absent a faster path to risk-based rates, it will take Citizens five more years to reach actuarially-fair rates, and we can’t count on more storm-free years.

These changes must be introduced with caution so as to not disrupt the marketplace, accompanied by efforts to promote risk reduction through property hardening, known as loss mitigation. Without loss mitigation, other market changes have only limited effectiveness. Improving homeowners’ knowledge of the benefits of mitigation and making mitigation more affordable are keys to reducing property insurance prices while maintaining fairness. What is most fair is helping Floridians see the true cost of risk and deal with those costs in the present day, not letting the debt pile up for the next generation.

http://www.naplesnews.com/news/2012/jan/08/guest-column-floridas-property-insurance-market/

CoreMessage, Inc.
By Manley Fuller
January 6, 2012

As Florida’s elected officials gear up for the start of the 2012 state legislative session, one issue we hope they will tackle deals with Florida’s increasing vulnerability to storms, flooding and sea level rise. It is critical that our elected and appointed officials recognize the vital role our natural habitats — including reefs, sea grasses, barrier islands, wetlands and conservation lands — play in providing benefits to the Sunshine State.

While we firmly believe smarter land-use and traditional environmental policies need to play their part, we also think Florida needs to make fiscally sensible reforms to Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund.

As a low-lying landscape, Florida is particularly vulnerable to coastal erosion, sea level rise and storm damage. Our natural habitats are critical to providing vital habitat for fish and wildlife, and to fostering our essential tourist sector. In addition, our natural coastal features are critical to public safety, as they help buffer us from inevitable storms. The undeveloped Everglades serve as a prime example of a natural landscape that provides a buffer to the built environments of South Florida.

Where and how we build is a critical component to protecting Florida’s natural environment.

We support laws and policies that remove public subsidies for development of our most flood-prone coastal properties, namely by removing Citizens Insurance coverage eligibility for new construction in these areas.

Furthermore, the state should not allow insurance subsidies that encourage new development seaward of the Coastal Construction Control Line or within the Coastal Barrier Resources System.

Established in 1982, with overwhelming bipartisan Congressional support, the CBRS identified coastal areas of high risk for flooding and of exceptional ecological value. As an excellent example of common sense conservation and fiscal prudence, the federal government prohibits subsidies in undeveloped barrier and coastal islands. President Ronald Reagan and Congressional leaders such as Thomas B. Evans, Jr. and the late John Chafee realized the importance of removing public incentives to build in high-risk locations along the Atlantic and Gulf Coasts – an example our state’s elected leaders should follow this year.

The proposals we stand behind would not prohibit development, but would instead require private citizens to assume the financial cost of the risks they engender, rather than shifting this burden to consumers and businesses statewide. These reforms would also encourage the development of risk-based price signals, creating better alignment of public and valid private interests.

By returning Citizens to the insurer of last resort and scaling back the size of the state-run Florida Hurricane Catastrophe Fund, we can better protect our state’s natural environment, reduce the public’s exposure to massive “hurricane tax” assessments and put Florida back on a glide path to stability.

This piece was co-authored by Manley Fuller, president of the Florida Wildlife Federation, and Gary Appelson, policy coordinator of the Sea Turtle Conservancy in Gainesville.

http://coremessage.com/news/florida-voices-stop-subsidizing-construction-on-flood-prone-coasts/