FROM THE EDITOR

The mark of any major insurance reform bill is that it promises rate relief. After all, why would lawmakers engage in the heated, elbow-throwing process of redrawing the rules governing the legislative and regulatory oversight of a line of coverage if it doesn't respond to their constituents? For example, take the 2003 legislative sessions when lawmakers enacted bills addressing the medical malpractice and workers' compensation crisis. After the dust settled over two of the most hard-fought insurance bills in recent memory, the legislature mandated that medmal carriers lower their rates by at least 7.8 percent, while regulators immediately implemented a 14 percent across-the-board cut in workers' comp rates.

The recent passage of the homeowners' bill is no exception. Under the bill, insurers are blocked from non-renewing policies during the upcoming hurricane season, nor can they non-renew policies without providing policyholders a 100-day notice as opposed to 90 days. The bill also charged the Office of Insurance Regulation with calculating a presumed factor that reflects the savings attributed to the expansion of the Florida Hurricane Catastrophe Fund. Due to be published by March 1, all property insurers must submit a rate filing reflecting the estimated savings as it would apply to all new or renewal policies as of March 15. In addition to the presumed-factor filing, insurers must submit a so-called “true-up” filing that reflects an insurer's entire projected drop in loss exposure based on all the changes contained in the bill.

In an Office of Insurance Regulation order, the true-up filing can be made at any point after an insurer submits a rate filing reflecting the presumed factor and the insurer can present documentation that it has adequate reinsurance to cover the 2007 hurricane season. For all other insurers, the filing must be made within 90 days after the insurer receives confirmation of its reinsurance treaties, but no later than September 30.

If regulators and the commission had stopped there, the industry likely would have passed over the changes in silence. However, when the commission called for an emergency order that applied retroactively to all rate increases and the cancellation and non-renewal of policies before the enactment of the law, the industry found itself with little choice by to challenge the order. Faced with a protracted legal battle, the state and the industry reached an agreement whereby, once carriers implement the March 15 rates, they are free to go forward with the non-renewal of policyholders who had been notified prior to January 30.

Most observers would declare this arrangement a win for the industry. But such a statement would be far too bold, given the way the political winds are blowing. One thing is for sure: Governor Charlie Crist is not going to be a governor who will shy away from a fight. Buoyed by strong poll numbers that show more than two-thirds of Floridians supporting his policies, he has little reason to change his course of action. Thus, his comment on the industry's challenge to the emergency order: “They can't win in the legislature any more; they can't win in the Cabinet any more; so they're going to try the court system.” It is a point not lost on the industry. Even though, on this issue, the industry reached an agreement it could live with, there is little to stop Crist and the legislature from enacting other orders or passing other laws. All of which is to say that the industry would do well to tread lightly during the session.