Florida House Nixes Shifting Citizens Policies to Surplus Lines

The Florida House has rejected a proposal that could shift homeowners away from the state-backed Citizens Property Insurance and into private surplus lines insurers.

The Florida Senate last week narrowly voted for a property insurance bill that would allow homeowners seeking coverage from Citizens to be shifted to a private surplus line insurance company. Surplus line companies are not subjected to the same regulations as companies based in the state.

But the House stripped out that provision from the bill (SB 1672).

Rep. John Wood, R-Winter Haven, said that the issue was dead for this year’s session.

Lawmakers have taken several steps over the last few years to try to steer people away from the state-created Citizens. Citizens was set up initially to be an insurer of last resort but it grew as Florida was hit by hurricanes and private insurers sought to limit their exposure in the Sunshine State.

Last year, legislators approved creating a clearinghouse that requires insurance agents to look at offers from private insurers before allowing someone to purchase a Citizens policy. A customer is ineligible for Citizens if one of the insurers charges premiums that are within 15 percent of Citizens rates.

The Senate bill as originally passed would have added surplus line insurers to those that could be offered through the clearinghouse starting in January.

Sen. David Simmons, R-Altamonte Springs, said last week it would give homeowners another choice for coverage. He said homeowners would be told ahead of time that the surplus line insurers are not regulated the same way as other insurers. He also noted some Floridians already insure their homes with these type of insurers.

But many legislators, especially from those areas with heavy concentrations of Citizens policies, opposed the idea.

View this article online: http://www.insurancejournal.com/news/southeast/2014/04/30/327963.htm

Florida Senate Passes Measure to Encourage Private Flood Insurance

The Florida Senate is backing a bill to entice private insurance companies to sell flood policies in the state that’s the most vulnerable to storm surge.

The Senate this week unanimously passed the bill (SB 542) sponsored by Sen. Jeff Brandes, a Republican from St. Petersburg. It heads to the Florida House where a similar bill is moving.

The legislation is designed to make it easier for private companies to sell flood insurance.

Florida is home to 37 percent of the federal policies and state officials say congressional attempts to overhaul the troubled program burdened many Floridians with skyrocketing premiums. Congress just recently rolled back some of the increases it permitted in 2012.

It’s not clear, though, that many private insurers will want to assume the risks of flooding.

View this article online: http://www.insurancejournal.com/news/southeast/2014/03/28/324688.htm

More Citizens changes proposed

By Lloyd Dunkelberger , Herald-Tribune
/ Tuesday, January 14, 2014


In a renewed effort to reduce the size of the state-backed Citizens Property Insurance, lawmakers are turning their attention to policies for condominiums, apartment complexes and commercial property.

Senate Banking and Insurance Chairman David Simmons, R-Altamonte Springs, on Tuesday outlined proposals that would move many of those policies out of Citizens and into private insurance companies.

The proposals include a plan to use the new Citizens Clearinghouse, which this month will begin offering private policies to Citizens’ residential customers, to also cover condominiums, apartments and other commercial residential properties.

Another would cap coverage of condo complexes at $10 million. The commercial residential properties currently have no cap and Citizens is covering some 323 buildings — many likely beachfront towers — valued at more than $25 million.

The bill would also remove the 10 percent annual cap on premium increases from commercial properties insured by Citizens, allowing the rates to increase more rapidly to a level considered more “actuarially sound.”

Building on a major Citizens bill passed last year — which included the clearinghouse provision for homes — Simmons said the new measures were aimed at reducing “a significant amount” of potential liability for Citizens if the state is struck another major hurricane. A further reduction in Citizens’ size would also reduce the potential for assessments on all Florida insurance policyholders if they have to make up a deficit in the state-backed insurer.

Citizens President and CEO Barry Gilway said the insurer supported expanding the clearinghouse to other properties. He said Citizens has made “huge progress” in reducing its storm exposure, dropping from $510 billion in recent years to $330 billion.

Condominiums and other commercial residential properties represent some $93 million of that remaining exposure, he said.

The clearinghouse for homeowners is scheduled to start by Jan. 27, with four private carriers offering policies to Citizens’ customers, Gilway said. Under the law, new Citizens customers have to accept private coverage if the clearinghouse premiums are within 15 percent of the government-backed policies, while existing customers who renew their policies will be moved to private companies if the rates are equal or lower than the Citizens’.

More private companies are expected to join the clearinghouse in the coming year, Gilway said.

But Gilway said it would take about 18 months to add the commercial residential policies to the clearinghouse, because the policies are more complex than homeowner policies.

Sen. Gwen Margolis, D-Miami, who represents many coastal properties in her Miami-Dade County district, questioned the impact on condominium owners and coastal businesses.

“I’m just concerned until I see some numbers,” Margolis said.

Sen. Nancy Detert, R-Venice, said removing the annual premium cap for commercial non-residential buildings could also impact condominium owners since common buildings, such as a clubhouse, would fall into that category and rate hikes would be passed on to members of the condominium association.

But Detert also acknowledged the need to continue to reduce Citizens, designed as the “insurer of last resort” but expanded as lawmakers responded to a devastated insurance market following a series of hurricanes.

“I think we need to gird our loins and prepare for screams from people who will be affected,” Detert said. “But rate is based upon risk…If you’re sitting on the beach you’re more at risk than the people in Arcadia. We are not going to make everybody happy on this.”

Sen. Tom Lee, R-Brandon, a former Senate president, reminded his colleagues that lawmakers had a hand in keeping Citizens’ rates affordable. He said the Senate needs to “be sensitive to both the political and the economic implications of this.”

He suggested if a law is passed, it could take effect on Jan. 1, which would be “a more appropriate date for some people” and would also put it past November’s general election.

Senate moving to ease flood rate pain

TALLAHASSEE – With one senator calling it Florida’s “most talked-about problem,” state lawmakers on Wednesday moved to entice private companies into a flood insurance market that has been dominated by a federal program.

The Senate Banking and Insurance Committee unanimously backed a bill (SB 542) that would encourage more private insurers to offer an alternative to the National Flood Insurance Program by giving the companies more freedom to set rates and shape coverage plans.

“Ultimately this bill puts consumers in control,” said Sen. Jeff Brandes, R-St. Petersburg, the bill’s sponsor.

Brandes filed the legislation in response to escalating premiums in the federal program, which provides coverage for 2 million Floridians. Some 269,000 of those policies that receive subsidized rates could face substantial increases under a new federal law aimed at shoring up the NFIP.

Efforts to block the NFIP rate escalation have so far been stymied in Congress, but glimmers of hope emerged in Washington on Wednesday.

In the Senate, Democrats are pushing for a vote on a bill as early as next week that would delay the increases for many homeowners for up to four years.

But that bill’s prospects in the House are uncertain. Both chambers must agree for the delay to be instituted. In the U.S. House, a bill to delay the rate increases for 15 months appeared to have more momentum, though it is uncertain when, or even if, that legislation would be scheduled for a vote.

Brandes said regardless of what happens in Washington, Florida lawmakers need to proceed with a private-sector plan.

“Hoping Congress will act is not a strategy we can rely on,” Brandes said. “We need a strong alternative.”

Brandes said his bill would allow private insurers to provide “more choices” for flood coverage, including allowing homeowners to decide whether to opt for coverage for the full replacement cost of their homes or the mortgage amount or its actual cash value. It would also allow homeowners to limit coverage to the main house structure or opt not to cover personal property.

Insurance companies would have more freedom to set rates, although they could use the standard rate review process. One option would include a “consent” agreement with the homeowner on the rate amount.

Brandes said the rates set by the NFIP would act as a “ceiling” for the private insurers’ rates. But he said he believed there was an opportunity for companies to offer competitive, actuarially sound rates in cases where homeowners are now facing annual insurance costs of $30,000 or $40,000 in the federal program.

Sen. Nancy Detert, R-Venice, voted for the bill, warning that Florida could face another housing crisis unless it is addressed.

“This is the most talked about problem in the state of Florida today,” Detert said. “We as a state cannot afford to go through another real estate bust when we’re just now coming out of one.”

But Detert also added a note of caution, saying the legislation provides no guarantee that private insurances will jump into the market or the rates they offer will help consumers. She noted that the state has been trying for years to entice more private insurers into the property market to reduce the size of the state-backed Citizens Property Insurance with limited success.

She said one of the biggest problems impacting flood insurance rates are outdated maps used in the federal program.

Brandes said he is looking at an option in which the state could begin developing its own maps, although he noted it would come with a cost.

Sen. Alan Hays, R-Umatilla, voted for the bill but said he wanted a prohibition in the legislation blocking Citizens from offering flood insurance properties. The bill next heads to the Senate General Government Appropriations Subcommittee headed by Hays.

Sen. Garrett Richter, R-Naples, said “the most responsible way to reduce premiums” is to expand the size of the flood insurance market. “I think we’re on the right track,” he said. “This is a good bill.”

A similar bill is expected to be filed in the House by Rep. Larry Ahern, R-Seminole.

Senate Schedules Key Vote on Flood Insurance Rate Delay

The U.S. Senate is expected to take a key vote Wednesday on a bill that would delay some of the flood insurance rate hikes triggered by the Biggert-Waters Flood Insurance Reform Act of 2012.

The procedural vote will determine whether the Senate will proceed with debate on the Homeowner Flood Insurance Affordability Act (S.1846). Sixty votes are required to move the measure to the floor for a “yes-no” vote.

The Senate bill would postpone for four years some of the rate hikes that are beginning to hit primary residences. It would also delay increases for properties sold after July 6, 2012, the start date of the Biggert-Waters act.

The Senate delay would be for four years, or six months after the Federal Emergency Management Agency (FEMA) proposes policy changes and regulations to address affordability issues, which the Congressional Budget Office (CBO) estimates would occur during calendar year 2018.

The Senate bill would not block rate increases for most business properties, secondary homes or repeat flood properties. Rates on those properties are scheduled to increase by 25 percent per year until they reach full cost.

The CBO estimates that the change in premium rates proposed by S. 1846 would reduce net income to the National Flood Insurance Program (NFIP) by about $2.1 billion over the 2014-2024 period.

CBO estimates that the NFIP would borrow and spend an additional $900 million over the 2014-2018 period because of this legislation. However, because total borrowing is limited under current law, additional amounts borrowed over the next five years would be offset by less borrowing in later years, resulting in no net effect through 2024, according to CBO.

The Senate bill is sponsored by Sen. Robert Menendez, D-N.J., and has 19 Democratic and 8 Republican co-sponsors.

A group of senators from coastal states held a press conference yesterday to rally support for the bill.

The House has a similar but limited proposal that would delay rate increases for only six months. Sponsored by Rep. Michael Grimm, R-N.Y, this bill (HR 3370) has 117 Democratic and 51 Republican co-sponsors but faces opposition from key Republicans including Rep. Jeb Hensarling (R-Texas), who chairs the House Financial Services Committee that has jurisdiction over flood insurance.