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'No guarantees' as House debates insurance

The top goals: soften premium spikes, ease the Citizens bailout and stem the flight of insurers from storm-battered Florida.

By ASSOCIATED PRESS
Published April 28, 2006

TALLAHASSEE - The Florida House on Thursday began debating a hurricane insurance bill with an admission that with 13-million Floridians living in coastal counties, there's no easy solution to the combination of spiraling coverage costs and disappearing insurers.

In a state battered by eight hurricanes in two years, with the prospect of another active storm season, nearly every legislator has heard from constituents complaining about spikes in their annual premiums of 50 percent, 60 percent or 100 percent.

The bill the Legislature is expected to pass sometime in the next week is at best a beginning, with even supporters acknowledging it won't quickly lower premiums dramatically - although it would ease the pain of assessments Floridians are paying to bail out Citizens Property Insurance, the state's insurer for those who can't get private coverage.

The legislation also might not be able to encourage more private insurers to do business in the state - the bill's primary aim. The hope is that if more private companies write policies, rates will drop.

"This is a very tenuous step of trying to bring back a market ... with no guarantees," said the bill's House sponsor, Rep. Dennis Ross, R-Lakeland, as floor debate began. "We take the first steps with this bill of trying to entice a market back."

Ultimately, the difficulty is largely this: The Legislature can't control the weather.

"We're going to need a break from the meteorology," Senate President Tom Lee, R-Valrico, said this week.

Lee said if Florida continues to see four storms each year costing insurance companies $15-billion, government may not be able to do much to persuade them to stay.

But the Legislature is trying.

The measure (HB 7225) makes it easier for private insurance companies to tap the state's Hurricane Catastrophe Fund, a backup account that can be used when losses top a certain amount. It also provides for a fast and large cash buildup of the Catastrophe Fund.

The bill also makes it easier for companies to raise premiums. It would let property insurers raise their premiums by 5 percent on average statewide, or 10 percent on average in any one area, without having to get approval from regulators. The House discussed the wide-ranging bill for several hours Thursday. A final vote is likely next week. The measure also still needs Senate approval.

A central theme of the bill is that something must be done about Citizens Property Insurance Corp., which was created by the state after Hurricane Andrew hit South Florida in 1992. It was intended to be an insurer of last resort. But it has become the second-largest provider of property coverage in the state.

And when Citizens can't cover its obligations, all Florida homeowners bail it out with an assessment tacked on to insurance bills, driving up premiums further.

The bill would put $920-million in state tax dollars into bailing out Citizens. Then, to cover the remaining shortfall, it would stretch out the payments over a decade, which would allow assessments to be about $10 a year for the average homeowner, instead of $200.

The bill also seeks to reduce Citizens' exposure by allowing it to charge owners of certain homes, mainly second or vacation homes, higher rates. It also would exclude homes with replacement values of $1-million or more from Citizens coverage. Private companies that wanted to pick up that coverage could charge whatever they wanted without state review.

The bill also establishes a $500-million endowment to provide grants and no-interest loans to strengthen homes to better stand up to hurricanes.

Democrats were shot down when posing their solution: a complete scrapping of Citizens in favor of a state insurance company that would cover the first $100,000 of risk in all Florida homes, similar to the way the federal government provides all flood insurance since private companies won't.

[Last modified April 28, 2006, 01:15:08]