An insurance advocacy group last week urged creation of aprivately-run state insurer to remove the private sector fromproviding hurricane insurance in Florida.

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Americans For Insurance Reform issued a report–”At The TippingPoint: The Homeowner Insurance Mess in Florida & How To FixIt”–asserting that with more carriers leaving the state, othersthreatening massive cancellations and skyrocketing prices, the timefor fixing the current system has passed.

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The group proposed creation of a privately-run state insurer forthe hurricane wind portion of homeowners' insurance coverage, withall of the wind business written by this entity.

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“This would end low-risk cherry-picking by the insurers,” thereport said.

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Also, by competitive bids, an insurer or multiple insurers wouldservice the policies and be responsible for claims adjustment aftera hurricane occurred, the report said.

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Private insurers would still sell homeowners coverage–excludinghurricane wind coverage–to wrap-around coverage sold by theprivately-run state insurer.

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“If writing only the hurricane wind portion of the coverageproves too narrow a spread, consideration should be given to usingthis approach to write the entire homeowners' insurance policy forall Floridians,” the report stated.

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Sam Miller, executive director of the Florida Insurance Council,said that while his organization has taken no position on a statetakeover of the hurricane business, the idea has been around forsome time.

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In general, he noted, the industry has said that the financingresources Florida has in place for hurricane losses at the momentwould not generate sufficient funds to cover all Florida hurricanelosses.

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“Several insurers, during a workshop with House Democrats lastmonth, said the concept might be a sound one, but many months ofwork would be necessary to determine if it actually would work,”Mr. Miller said.

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A state commitment to charge actuarially sound rates would be atop prerequisite for a successful state-run plan, he added.

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Joseph Annotti, senior vice president for the Property CasualtyInsurers Association of America, said the AIR plan appears based onan “oversimplified 'government knows best' concept, one that hasfailed consumers around the world.”

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“You only need to look at the performance of the state-runCitizens Property Insurance Corp. for an example of how well thisidea might work,” added William Stander, assistant vice presidentand regional manager for PCI.

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“Citizens is running at a $1.8 billion deficit, has had a numberof operational and management problems, did not have adequatestaffing to handle the claims volume, and logged by far the largestnumber of complaints from homeowners of any insurer,” he said.

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“Instead of creating yet another state-run entity, what isrequired is an influx of capital with an appropriate long-term rateof return,” he added. “This, coupled with continued efforts tostrengthen building codes, the adoption of prudent land-usepolicies and the encouragement of disaster mitigation, will allowpolicymakers to focus on finding the real solutions to problems inthe state's insurance market.”

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