Florida Governor Jeb Bush last week signed legislation aimed at bolstering the state's beleaguered residential insurance market as well as helping homeowners better cope with another severe hurricane season.
The legislation–Senate Bill 1980–offers $250 million in loans to insurance companies to help them continue to write coverage and to take policies from Citizens Insurance, the state's insurer-of-last-resort.
Starting next July, the bill also increases insurer flexibility to increase rates–allowing for adjustments of up to 5 percent statewide and 10 percent in a particular region.
Citizens will receive $715 million to offset its current deficit, but will have its obligations increased as well. As of March 2007, Citizens will be required to collect enough premiums to prevent a deficit in the "worst-case scenario" of a once-in-70-year storm.
Homeowners will also receive funding from the bill, which includes $250 million in grants to make older homes more resistant to hurricane damage. The state will offer free inspections to determine vulnerability to wind damage, and homeowners of primary residences valued at less than $500,000 that can benefit most from a retrofit will be eligible for a grant of half the cost of the project–up to $5,000.
"Two unprecedented, back-to-back hurricane seasons with eight hurricanes and four tropical storms pushed Florida to the brink of an insurance crisis," said Gov. Bush. "These reforms will help to ensure the state's long-term economic vitality as we continue to deal with this increased hurricane activity."
Insurance groups had no immediate comment concerning the law's passage, but have voiced complaints in the past about artificial rate suppression in the state and how it discourages carriers from writing coverage in the cat-prone region.
According to the governor's office, private insurance companies collected an estimated $18 billion in premiums from 11.9 million residential policyholders–including more than one million mobile-home owners during 2004 and 2005–and paid out $38.5 billion in claims for damages.
During the same time period, Citizens collected $1.2 billion in premiums from about 815,000 policyholders and paid out more than $3.9 billion in claims for damages.
"I am proud that this legislature and Gov. Bush did not avoid the challenges brought about by eight devastating storms in 15 months and over $30 billion of losses in Florida," said Senate President Tom Lee, R-Hillsborough. "Today's bill-signing marks the first step in a multiyear approach to attract more private capital, to spread out the risk, to encourage hurricane preparedness, and to depopulate the government-run insurance company."
Florida House Speaker Allan Bense, R-Panama City, said the reforms were important for maintaining the state's insurance market and ensuring companies would continue to operate there. "The key to insurance reform in Florida is ensuring both affordability and availability," he said.
He noted that the reforms being put into place will address the problem by encouraging private companies to write policies in Florida, reducing the amount of risk assumed by Citizens Insurance, and aggressively promoting the hardening of existing homes against future storms.
Florida Insurance Commissioner Kevin McCarty said he was "pleased that the legislature was able to complete this landmark legislation, and I am proud to stand with Governor Bush as he signs it into law."
He also noted the importance of keeping insurers in Florida. "Attracting fresh capital and additional capacity are among the toughest challenges we face, and this legislation contains innovative and significant measures to address these problems," he said.
Tom Gallagher, the state's chief financial officer, cautioned that work on the issue is far from over, and is not solely the responsibility of state lawmakers.
"Our priority must now be preparing Floridians for the upcoming storm season," he said. "All the changes made to our insurance market will mean little if Floridians don't take the time to prepare."
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