Florida Homeowner Rates To Rise

Florida Gov. Charlie Crist has vowed to sign legislation that could raise home coverage rates up to 10 percent for more than one million policyholders with the state-created Citizens Insurance Corp.

The Florida House of Representatives gave final approval and sent the governor the bill last week. The House had originally passed HB 1495 with a 20 percent maximum rate hike, while the Senate countered with 5 percent, after initially proposing 10 percent.

Legislators in the Senate agreed to pass an amendment, proposed by Sen. Mike Fasano, R-New Port Richey, capping the maximum increase per policyholder at 5 percent for the purposes of negotiating a 10 percent ceiling with the House.

Sen. Evelyn Lynn, R-Daytona Beach, said if the House had a cap at 20 percent and the Senate had 10 percent, the final number after negotiations would be higher than 10 percent. Starting at 5 percent, she said, allowed the Senate to negotiate up to no more than 10 percent.

The bill also calls for a "cash buildup" factor for the Florida Hurricane Catastrophe Fund, under which FHCF reimbursement premiums charged to Citizens and private insurers would increase incrementally over a five-year period.

Additionally, the Temporary Increase in Coverage Limit (TICL) layer–which is a $12 billion optional FHCF reinsurance layer that sits above the fund's mandatory layer–would be phased out over a six-year period under the bill. "As the TICL option is phased out, its pricing will increase by an additional multiple each year until TICL is eliminated," the bill summary states.

A separate residential property bill passed by the legislature, HB 1171, authorizes certain insurers to offer policies with no restraint by regulators on their maximum rate. However, the Office of Insurance Regulation would still have the right to reject rates that are actuarially inadequate or based on unlawful factors.

The American Insurance Association said insurers offering such policies must be well-capitalized, would not be able to buy optional reinsurance coverage from the state's catastrophe fund, and would be required to provide consumers with a variety of disclosures and a comparative quote from Citizens Corp.

"The financial storm we've experienced recently certainly helped illustrate the precariousness of providing insurance through a mechanism–the Florida cat fund and Citizens–based on crossed fingers, prayer and the hope that others will provide a bailout," said Liz Reynolds, Southeast state affairs manager for the National Association of Mutual Insurance Companies, following the bill's passage.

She said if those two entities cannot manage the coverage, "then the citizens of Florida will have to keep picking up the tab. With passage of this legislation, Florida's insurance market and its policyholders are headed toward a much brighter future."

Another bill passed by the legislature–HB 853–restores the exemption for surplus lines insurers from regulatory requirements of admitted carriers. The exemption was called into question in a 2008 Florida Supreme Court ruling, Essex v. Zota.

That ruling, according to the National Association of Professional Surplus Lines Offices, held surplus lines carriers were only exempt from the rating section of Florida's Insurance Rates and Contracts statute.

The bill states: "Except as may be specifically stated to apply to surplus lines insurers, the provisions of [the statute] do not apply to surplus lines insurance authorized under…the Surplus Lines Law."

Cecil Pearce, AIA vice president of state affairs, said that "passage of this legislation is also a victory by insurers and the state's business community over the trial bar, who saw the court decisions as an invitation to endless litigation against surplus lines insurers, whose policies suddenly were required to meet requirements that had previously applied only to admitted insurers."