Legislation aimed at reducing property insurance premiums wasapproved by the Florida Legislature late today with lawmakerspromising to revisit the issue during their regular session inMarch.

The measure passed unanimously in the Senate and by a 116 to 2vote in the House, and will now go to Governor Charlie Crist, whois expected to sign it into law.

The bill has drawn harsh criticism from the insurance industry,which has argued it provides only short-term fixes, makes themarket more difficult for insurers and could expose taxpayers to amassive financial burden in the event of a major hurricane.

Among the more immediate effects of the bill are provisionsrolling back rates for the state's insurer of last resort, CitizensProperty Insurance Company and removing restrictions on Citizensrequiring it to be non-competitive on price and charge actuariallysound rates that are no lower than the top 20 private insurers.

This could spell potential trouble for insurance agents, whoreceive a lower commission from Citizens than from a privateinsurer.

Rep. Ron Reagan, R-Sarasota, who identified himself as aninsurance agent, said in discussions before passage of the billthat “insurance agents are going to take it on the chin on thisone,” but also suggested the issue as one that could be revisitedin March.

“The bottom line is that Florida has just reinforced itsreputation as one of the most overregulated insurance markets inthe country,” said Cecil Pearce, vice president for the SoutheastRegion for the American Insurance Association.

Mr. Pearce said the bill, “while providing some immediate raterelief to policyholders, who live in the most hurricane-threatenedareas of the state, does nothing to encourage insurers to investadditional private capital in Florida, which should be the ultimategoal of public policymakers.”

The legislation includes provisions that expand the statecatastrophe fund's capacity to cover 90 percent of losses between$6 billion and $35 billion, while also allowing primary insurers topurchase reinsurance from the Florida Hurricane Catastrophe fund atlower rates than the private market.

Mr. Pearce said this meant the bill has the potential to saddleFlorida policyholders and taxpayers with billions of dollars inhurricane losses,

In an analysis of the bill, Bank of America Equity Researchanalyst Tamara Kravec noted that the changes being made to thecatastrophe fund could affect demand for reinsurance and reinsurerswho previously focused on the Florida market would begin to lookelsewhere for business.

Additionally, the changes made at Citizens will allow it todirectly compete with private insurers while also being subsidizedby the state.

Private insurers for all lines, not just homeowners, are nowexposed to assessments from Citizens, and property insurers will berequired to pay or deny claims within 90 days of being notified andreturn “excess” profits totaling more than 10 percent of averageunderwriting profit over a ten year period.

“Insurers don't mind competition, but oppose creating anenvironment where the state does not have to play by the same rulesand can undercut the private market as provided in thislegislation,” said Jeff Brewer, a spokesman for the PropertyCasualty Insurers Association of America. “These actions do notencourage insurers to come back into already troubled market.”

Another portion of the bill addresses what lawmakers referred toas “cherry picking.” It requires any insurer that writes privateauto coverage in Florida and property in another state to alsooffer property coverage in Florida.

The bill also suspends the state's “use and file” rate systemuntil Jan. 31 of 2009.

Several provisions that had been viewed as extremely hurtful bythe insurance industry were removed when lawmakers conferred overthe weekend.

Among the items excised was one that would have barred insurersfrom setting up Florida-specific subsidiaries and would haverequired the state Office of insurance Regulation to factor in thenational profits of an insurer when considering a rate request.

“Although the Legislature stepped away from the abyss and didnot enact the most damaging reform proposals that were on the tableduring the special session, the legislation does not resolve thecritical problems in the Florida insurance marketplace,” said Mr.Brewer.