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A more stable policy option

A state bill would let businesses choose property insurance without assessments.

By TOM ZUCCO, Times Staff Writer
Published February 8, 2008


Business owners in Florida could have the option of buying a commercial property insurance policy that does not carry the threat of an assessment from state-backed Citizens Property Insurance, according to a state bill being drafted by Sen. Mike Bennett, R-Bradenton, and Rep. Garrett Richter, R-Naples.

Although the coverage could initially be more expensive, proponents argue that the premium wouldn't suddenly shoot up if claims from massive storms forced the state to assess policyholders. It is that kind of financial stability business owners are looking for.

Commercial property insurance in Florida usually comes from two sources: admitted carriers or surplus lines carriers. The state regulates the rates of admitted carriers, but not those of surplus lines carriers.

However, both admitted and surplus lines carriers are assessed up to 10 percent of their premiums if Citizens runs a deficit, as it did in 2004-05. The only lines exempt from assessments are medical malpractice and workers' compensation insurance.

The proposal would add to the list a hybrid commercial policy sold by both admitted and surplus lines carriers.

"It could cost more," Bennett said, "but you'd end up buying what you want to buy."

The Florida Chamber of Commerce is one of the bill's main supporters. David Daniel, chamber vice president for governmental affairs, said a poll of chamber members showed 74 percent preferred "an adequate premium rather than a lower premium with assessments after a storm."

Such after-storm assessments can be staggering. All Florida policyholders saw nearly $2-billion worth of Citizens assessments tacked onto their residential, commercial and auto insurance premiums to cover losses from the eight hurricanes that hit Florida in 2004-05.

But with more than $10-billion in claims-paying ability, Citizens today has twice the assets it had in 2004.

Citizens officials acknowledge that a shrinking of the company's $37-billion assessment base - by dropping some commercial lines policies - would mean that if another assessment was needed, people with homeowner and auto policies would have to pay more. How much more, officials aren't sure yet.

Bennett said that since most of Citizens' assessment base is in its residential line, the burden to homeowners would be slight.

Another concern is Citizens' bond rating, which could be negatively affected if Citizens has fewer assets to draw upon.

But proponents argue that the separation between commercial and residential insurance should go beyond the type of coverage.

"We just want to pay our fair share," Daniel said. "Business owners tell us all the time they want stability and predictability. But assessments are that dark cloud on the horizon."

Tom Zucco can be reached at or (727) 893-8247.

[Last modified February 7, 2008, 22:44:33]

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