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Bush against Citizens bailout

The governor doesn't want to use the state's surplus to ease the insurance burden. He's also considering a wind damage cap.

By JONI JAMES
Published December 21, 2005

TALLAHASSEE - Months before Florida property insurance policyholders face a large assessment to bail out state-backed Citizens Property Insurance Corp., Gov. Jeb Bush on Tuesday said he'll adamantly oppose using state money to lessen the burden.

Just six weeks ago, Bush suggested he might support such an idea. But now he said he'd come to believe doing so would further aggravate Florida's insurance market.

"It puts the state on the front line directly responsible for insurance losses. That's what insurance companies want," Bush said. "I don't think it makes any sense."

Bush suggested this week for the first time that he may propose capping Citizens Property windstorm policies at $500,000, forcing high-end homeowners in the pool to buy more coverage from out-of-state insurers.

Bush's comments, the first extensive remarks about the state's growing insurance crisis, comes after two back-to-back hurricane seasons in which Citizens Property has had to pay out more in claims to policyholders than it has had in assets. The deficit situation at the state-run insurer triggers a state law that allows Citizens to assess all Florida property insurance policyholders.

This year that assessment for a deficit from the 2004 hurricane season amounted to $515-million. Next year, Citizens has projected it will need to collect nearly $950-million in assessments. For a homeowner paying a $1,500 annual premium, the cost would be about $165 added to the 2006 bill.

Those charges will come on top of premiums that are skyrocketing. Last week, Citizens said it hoped to raise its windstorm rates an average of 80 percent and its homeowner rates 45 percent statewide by mid 2006.

By contrast, Florida's government is flush with cash. A new estimate last month increased the state's revenue projections by $3.2-billion over previous estimates for 2005-06 and 2006-07.

Last month, Bush suggested he might be interested in using state dollars to help Floridians cope with at least the assessment costs. Chief Financial Officer Tom Gallagher, a 2006 Republican gubernatorial candidate, had proposed using additional sales tax generated from hurricane recovery efforts to offset the assessment.

On Tuesday, Bush said he was no longer open to the idea. "I'm more interested in moving toward reform so that we don't have to have this conversation on an annual basis," Bush said. "There is a point past which no private insurance is going to come to the market and when that happens ... they can't assess anybody. By default the state becomes the guarantor of windstorm damage."

Bush supports another Gallagher proposal: capping Citizens' windstorm policies at $1-million, which would force about 6,000 of Citizens policyholders with high-end homes to find coverage from out-of-state insurers. The policies Citizens writes for basic homeowner coverage have a $1-million cap.

But Bush said this week he thought $1-million might be too high. Perhaps, he said, $500,000 would do more good by creating more stability in Citizens' liability.

"Is it appropriate for a quasigovernmental entity to be providing insurance for every home irrespective of the value of that home?" Bush said. "If there was a cap, would that allow the surplus-line market to fill that void where you would create more stability in the insurance market? That's what we need to be looking at."

Bush's idea, however, would likely face key opposition from South Florida and even the Tampa Bay area, where Citizens policies are concentrated and where home values have exploded in recent years.

Even Gallagher's more lenient proposal, for example, got nowhere in last year's Legislature.

Joni James can be reached at 850224-7263 or jjames@sptimes.com

[Last modified December 21, 2005, 00:51:17]