Major Decisions Looming

But this decision kicks off a long series of legislative decisions in the next few months that could have tremendous consequences for the future of the state's property insurance market.

The fate of Citizens Property Corp., the state-created property insurer, as well as the health of the state's reinsurance fund, will be heavily debated by the Republican-controlled Legislature during the regular session. That is because many of the major property insurance changes adopted in early 2007 are set to expire soon.

If lawmakers are unable to reach a consensus at this year's regular session, many elements of the market will return to the way they were before Gov. Charlie Crist took office. For example, a state law that prohibits insurance companies from enacting rate hikes while they are being reviewed by regulators is due to sunset at the end of 2009.

The ultimate decisions, however, may have little to do with party affiliation. Instead, the final verdict may depend on geographical and political considerations and whether to push changes at a time that the nation's economy is in turmoil.

"There's going to be a lot of pressure on legislators in regards to the suffering of Florida families," said Florida Insurance Commissioner Kevin McCarty.

Legislative Agenda Still Taking Shape

None of the major players — including Crist and CFO Alex Sink — have released detailed proposals on what they would like to do during the 60-day regular session that starts March 3.

In the past, Sink has been in favor of reducing the amount of exposure the state has in the Florida Hurricane Catastrophe Fund, but she has yet to finalize her recommendations to state lawmakers. The fund, which serves as backup insurance for up to $28 billion in losses, has come under fire in recent months after it was revealed that it would have been short anywhere from $10-$15 billion if a major hurricane had hit the state this past year. This shortfall has led to fears that the state would have to impose major assessments in order to recoup the money it has promised to give companies in the event of a major storm.

Both Sen. Garrett Richter (R-Naples) and chairman of the Senate Banking and Insurance committee, and Rep. Pat Patterson (R-DeLand) and chairman of the House Insurance, Business and Financial Affairs Policy Committee, say they plan to take a serious look at reducing the size of the fund this year. Under existing law, the fund will shrink back to approximately $16 billion in exposure by 2010 if no action is taken.

"There are a lot of us out there who feel we are just one short year away from a disaster," said Patterson, who is an insurance agent.

But it's unclear how far lawmakers will go to reel in the size of the fund.

Richter said that at this point in time, he favors considering a phased reduction of the size of the fund over the next few years.

"Right now, I think there is a pretty common feeling that we are in a riskier position than most people really want to be," he said.

But Richter added that the reason he wants to phase in any changes to the fund is to minimize the potential impact on rate payers. State lawmakers in 2008 shot down a proposal to shrink the size of the fund because of fears it would generate rate hikes heading into a crucial election year.

"Quite frankly, it's probably unrealistic to think that all of a sudden all the strategies that were put in place to protect or lower consumer premiums are going to instantly disappear," said Richter. "I think it's more realistic to see a phase-out over time."

Crist Says He Will Fight for Consumers

Richter's approach may be needed in order to win support from Crist, who has spent most of his first two years in office consistently criticizing many of the major players in Florida's homeowners' insurance market. Any legislative changes ultimately would need to win approval from the popular governor.

When asked about whether he will favor keeping the status quo or letting the state's insurance laws reset to how they were prior to his time in office, Crist said that he wants consumers to pay even less for property insurance.

"I think we need to continue to move the ball forward and fight for consumers and relieve the burden that many of them feel," said Crist.

But any changes to property insurance issues will first have to make it out of the Legislature, which right now appears deeply divided on many items, including whether or not to lift the two-year-old freeze on Citizens' rates and instead go to a system to make them actuarially sound.

McCarty said "at some point in time, we need to take a fresh look" at Citizens' rates. But some GOP lawmakers with large numbers of Citizens' customers in their districts are promising to push legislation to keep the rate freeze in place. If nothing is done, Citizens can raise its rates in early 2010.

Patterson says every year that insurance issues are "tough," but he said that geographic considerations will influence how lawmakers view them.

"You've got a state that is divided into three different opinions," said Patterson. "South Florida feels the rates are too high, there's Central Florida, where people feel like the rates aren't as bad but 'why am I paying for South Florida?' and North Florida, where people are wondering why they are paying for everybody else."

Demise of One Property Insurance Fix

Opinions not only differ for each region of the state, but they also seem to change quickly depending on the latest crisis.

Back in 2006, state lawmakers with great fanfare enacted the insurance capital incentive build-up program as a way to help repair the state's fragile property insurance market in the wake of the devastating hurricanes of the previous two years. Lawmakers put up $250 million to be used as loans for start-up insurance companies willing to do business in Florida.

The program has by all accounts been a tremendous success. The 13 private insurers who received the loans — which must be paid back over a 20-year period — matched the state's capital with their own money, bringing a total of $543.5 million into the Florida market. The companies that received the state assistance pledged to write a total of 1.71 million new policies, and some of those that received the money wound up taking on policies that had been written by Citizens, thereby helping reduce the risk of the state-created insurer.

Insurers only had to pay back the interest for the first three years after they received the state loan. But in January, state lawmakers took nearly $35 million the state had been paid back and placed it in the state's main bank account to help reduce a $2.3 billion shortfall in the state budget. Legislators also directed that all future money paid back to the state go into the general revenue account instead of being used to replenish the incentive program.

Sen. Carey Baker (R-Eustis) and chairman of the Senate General Government Appropriations Committee, said the decision does not mean lawmakers think the state's property insurance market is vibrant and healthy. He said that it was an effort to find some needed cash to help solve the state's budget crisis.

"The intent was just to free up that money," said Baker. "It's a recognition that we need all the general revenue we can get. That's the bottom line."