The Florida Office of Insurance Regulation said it has begun setting up a program for commercial property-casualty risks that cannot get wind damage coverage in the private market.
The Florida Financial Services Commission (FSC), consisting of Gov. Jeb Bush and cabinet members, gave preliminary approval Tuesday for the OIR to activate a standby commercial property and casualty Joint Underwriting Authority, or consider other options.
OIR Commissioner Kevin McCarty will report back to FSC on August 15th with a more defined set of rules.
Mr. McCarty said he wants to explore creating a plan to provide reinsurance to private companies who would continue to issue the commercial wind coverage, and even perhaps pick up some of the risk they recently nonrenewed. He is not sure that can be done quickly enough to address the current crisis.
"We have no doubt there is a burgeoning crisis in commercial insurance," Mr. McCarty said.
As part of the JUA plan, the Department of Financial Services (DFS) and the OIR will appoint a board for the commercial JUA within the next two weeks. The panel will serve as an advisory council while OIR decides whether to activate the JUA or go with some reinsurance proposal.
Mr. McCarty has been instructed by the cabinet to have something in place by Sept. 1.
OIR surveyed Florida businesses and found that 17 percent of some 1,900 respondents could not get commercial wind coverage at any price. A total of 42 percent were either canceled or nonrenewed, while 32 percent could get coverage but with higher rates and more exacting terms.
Mr. McCarty did say there is no panacea and neither businessowners nor homeowners should expect dramatic reduction in rates any time soon. "We are going through a very difficult transition period," he said.
Sam Miller, executive vice president of the Florida Insurance Council trade group, said such a program was last put in place for a short period after Hurricane Andrew in 1992.
He expressed support for the program but said rates have to be actuarially sound and any JUA panel should have insurance industry representation.
Florida Chief Financial Officer Tom Gallagher also won cabinet approval of a motion that could lead to a reduction in the Cat-Fund retention from the current $5.2 billion to $3 billion.
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