The Florida Legislature has ratified several changes in the rate-setting process for the state's property insurer of last resort to ensure they are more actuarially sound.

In steps to bolster the Citizens Property Insurance Company the lawmakers approved a $715 million appropriation to offset the insurer's 2005 deficit. That action would reduce the 11 percent premium assessment faced by all property writers in the state to about 2.5 percent.

The measure calls for the emergency assessment to be amortized over a 10-year period.

Changes for Citizens were incorporated in an omnibus property insurance reform bill that was approved Friday night in the closing hours of the 2006 session.

“The hurricane insurance package passed just before adjournment Friday night is the most significant property insurance bill since major legislation following Hurricane Andrew,” said Sam Miller, executive vice president of the Florida Insurance Council.

The bill requires rates of high risk accounts with Citizens to be set based on a 70-year probable maximum loss (PML) for policies issued after March 1, 2007, 85-year PML for 2008 and 100-year PML for 2009.

The bill also requires Citizens rates in the personal and commercial lines accounts to be sufficient to provide for the procurement of reinsurance, including the Florida Catastrophe Fund, and to pay all claims resulting from a 100-year event.

Among the bill's other provisions:

o Citizens rate filings for the high-risk accounts must be approved or disapproved by the State Office of Insurance Regulation within 90 days.

o The current requirement that Citizens rates not be competitive with authorized insurers is inapplicable in a county or area for which OIR determines that no authorized insurer is offering coverage.

o Deficit assessments against insurers recouped from their policyholders must be reduced by amounts to be collected by surcharges on Citizens' policyholders.

o Use of the public hurricane model as the minimum benchmark for determining windstorm rates for Citizens is required.

o Effective July 1, 2008 properties with a combined dwelling and content value of $1 million or more are no longer eligible for Citizens coverage.

o An assessment of 10 percent on non-homestead, or essentially vacation, properties is required if a deficit occurs in any Citizen account, with the funds used to offset the deficit. If that is insufficient the Citizens board will levy an additional 10 percent on all Citizens policyholders.

Mr. Miller said that provision replaced one defeated earlier in the day that would have provided up to two 25 percent surcharges on designated Citizens policyholders.

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