A spokesman for an insurer trade association said hisorganization's campaign to secure legislative changes next year forFlorida's home insurance market has received a boost from anobjective actuarial study commissioned by the group.

The study–by San Francisco-based Milliman Consultants–wasunveiled in May “to lay the groundwork for additional reforms in2008,” and “acceptance of that study by editorial boards andlegislators was validation,” according to Joseph Annotti, vicepresident for public affairs at Property Casualty InsurersAssociation of Americas (PCI).

Mr. Annotti said the positive reaction to the report camedespite a “misguided” attack by J. Robert Hunter, the ConsumerFederation of America's insurance director.

Insurers–following 2005 claims controversies, non-renewals andrate increases–had credibility issues, and, Mr. Annotti said, “wehad our heads handed to us” in the legislature this year.

“We needed an objective study from a qualified actuary to backour positions,” he said.

Milliman's report examined consequences of legislation this yearthat held down premium rates for Citizens–the state's homeownersinsurer of last resort–and expanded the Florida HurricaneCatastrophe Fund to offer more reduced-rate reinsurance to primarycarriers.

As a result of those measures, according to Milliman, there isincreased risk that policyholders will have higher premiums infuture years to cover Citizens and FHCF deficits.

Some costs would be transferred from policyholders in high-riskareas to those in less risky locations, and property insurancerisks would be transferred to auto and commercial insurancepolicyholders.

A few days after the report was issued, Florida Chief FinancialOfficer Alex Sink commented that Citizens was writing “actuariallyunsound” policies.

Besides Ms. Sink, Mr. Annotti said the report was shown to Gov.Charlie Crist's policy staff, legislative leaders and newspapereditorial boards.

The 2008 legislative package that PCI is working on wouldprovide financial incentives for storm-proofing homes, and returnCitizens' status as a true last-resort carrier.

Proposals aimed at restoring “some sanity to rating and pricingmechanisms,” according to Mr. Annotti, would include a method toprovide financial assistance to insure the truly needy,authorization for policies with 15-to-20 percent deductibleamounts, and a grant fund to help fill in the deductible coveragegap.

The Milliman Florida report came out at the same time itproduced a study for ProtectingAmerica.org, which advocates anational catastrophe fund to support regional cat funds throughoutthe nation. Milliman estimated such a national program could savehomeowners $11.6 billion annually.

Mr. Hunter charged that the two studies were in contradictionbecause the study for ProtectingAmerica.org showed Florida withzero additional savings.

Milliman said in a letter to National Underwriter that thereason the ProtectingAmerica.org study includes zero additionalsavings from the Florida Hurricane Catastrophe Fund is that thestudy assumes federal legislation will not change the FHCF, sothere will be a zero impact.

The PCI study does not address the question of whether theoriginal establishment of the FHCF resulted in a cost savings topolicyholders, Milliman explained.

Mr. Hunter said the Florida study implied the state was “a timebomb waiting to go off,” but Milliman said that “nowhere in the PCIstudy do we say or imply that Florida is a time bomb.”

Actuary Nancy Watkins–the report's chief author–said Mr. Hunterhad created a straw man for his attack, and there was “nodiscrepancy” in the report.

Milliman's letter noted that it did say increasing FHCF limitswould provide immediate reductions in homeowners premiums, and alsothat the legislation could jeopardize the state's creditrating.

In the ProtectingAmerica.org study, Milliman said it did nothold Florida up as a model, but used its cat fund reinsurancestructure as a starting point for a nationwide analysis.

“This analysis concluded that, if other states were to formtheir own catastrophe funds and a federal structure were put inplace to back them up, some of the adverse cost-shifting effects ofa single-state fund like the FHCF could be avoided,” Millimansaid.