The Florida Legislature's passage of a measure allowing the state-created property insurer of last resort to assume more risks is a dangerous financial move for businesses and taxpayers, insurance industry representatives warned.
They voiced their alarm after Friday's windup of the Legislature's session with an expansion of the Citizens Property Insurance Corporation allowing it to provide coverage to consumers if a private insurer's rates are more than 15 percent higher than comparable coverage from Citizens.
Previously, Citizens could offer coverage if the rate was 25 percent higher. In addition, the bill–SB 2498–freezes Citizens rates until Jan. 1, 2009.
William Stander, regional manager for the Property Casualty Insurance Association of America, said the measure takes the state closer to "financial catastrophe" and inevitable calamity.
"There are serious consequences to this quick-fix approach to the state's property insurance crisis," Mr. Stander said in a statement.
The more Citizens' rates fail to reflect the risk at hand, the greater the financial crisis that will occur when a major storm hits, he added.
Cecil Pearce, American Insurance Association vice president, said the measure will encourage further growth in the residual market.
The bill passed unanimously in the Senate and by a vote of 106-10 in the House. Republicans control both chambers.
Also in the final days of the session the lawmakers approved a bill banning creation of future Florida-only subsidiaries of big national writers and making existing subsidiaries report national financials when requesting rate increases in Florida.
The measure was pushed by Republican Gov. Charlie Crist and opposed by the insurance industry.
"We share the governor's concern about the property insurance market but would like to work to come up with a better long-term solution," Mr. Stander said.
A spokesman for the governor said Friday that "we look forward to reviewing all these bills when we receive them."
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.