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Citizens bailout has Bush support

Property owners could save hundreds of dollars on their insurance premiums if the state pays down the insurer's deficit.

By JONI JAMES
Published April 4, 2006

TALLAHASSEE - Gov. Jeb Bush signaled Tuesday that he would embrace a state bailout of Florida's state-run insurance company, a proposal that could save many Florida property owners hundreds of dollars next year on their insurance premiums.

Bush had objected to the idea since December, shortly after it was among the insurance overhauls proposed by Chief Financial Officer Tom Gallagher, a Republican gubernatorial candidate.

On Tuesday, however, Bush switched gears, echoing a position suggested by Senate President Tom Lee, R-Valrico. The governor said he'd be willing to use state money to pay down the $1.7-billion deficit at Citizens Property Insurance Corp. as long as lawmakers pass significant changes to shore up the state's private market.

Citizens, which provides insurance to property owners who can't find coverage from a private carrier, serves more than one out in five Florida policyholders.

"If there are additional reforms that are going to be put on the table, which the Legislature is really pursuing, to its credit, then I think providing some financial support from the reserves we have is more than appropriate," Bush said.

State law requires that Citizens charge assessments on all Florida property insurance policyholders, even those not in Citizens, when Citizens runs a deficit.

Florida policyholders are paying about 7 percent more on this year's premiums to cover Citizens' 2004 deficit of $516-million.

Last month, Citizens said its deficit from 2005 hurricanes had swelled to $1.7-billion, an amount that would require an assessment of $195 on each $1,000 worth of insurance premium in the state in 2007.

"I fully appreciate people's frustrations, but our options are limited," Bush said. "If we're honest with ourselves . . . premiums have to go up if there is an expectation of losses."

Bush declined to say how much state money he would be willing to spend to offset Citizens' deficit.

Bush's power to influence a Citizens' bailout is significant. He can veto any line item in the state's spending plan.

"What is essential to me is that we don't just go into denial and say there isn't going to be another hurricane or there's not going to be more losses and turn this just into a bailout," Bush said. "That's not going to happen on my watch."

The Senate's Banking and Insurance Committee is expected today to approve that chamber's proposals to strengthen Florida's attraction to private insurers.

Among the ideas being vetted: requiring nonhomesteaded properties covered by Citizens to pay more for coverage; banning Citizens from insuring properties worth more than $1-million; and mandating rate relief for homeowners who fortify their homes.

The House has proposed allowing insurers greater flexibility to raise rates without regulatory approval.

Bush's comments came Tuesday as he and the Cabinet approved a $200-million rate hike for the coming year for the state-run Florida Hurricane Catastrophe Fund, or CAT Fund, which has seen its assets depleted by the 2004 and 2005 hurricanes. The move will increase insurance policy premiums by 2.8 percent next year.

The rate hike assures the fund, which serves as a low-cost backstop for private insurers, has at least $1-billion in assets heading into the 2006 hurricane season. The fund helps insurers pay claims from catastrophes that cause more than $5.3-billion in insured damages statewide.

Bush said the hike is necessary if Florida is to continue to have private insurers. "Thank God we had the CAT Fund the past two years," Bush said.

"If we didn't have a CAT Fund, I think we would have had significant bankruptcies and it's possible that we would not have a private insurance market."

[Last modified April 4, 2006, 20:57:02]