A proposal to shift the way the state-backed insurer pays claims is on its way to the Senate floor after being changed to lower the state's overall risk following a major storm.
By unanimous vote, the Senate Budget Committee on Saturday approved a measure (SB 1342) that reduces the immediate assessments to shore up Citizens Property Insurance Corp. and gives the state and insurers more time to raise the funds necessary to pay off claims. Backers say that and other changes may make it more attractive for other private insurers to come into Florida and reduce the number of Citizens' policies, which now stand near 1.5 million.
"This bill does not change Citizens' liability to pay claims after a storm," said Senate sponsor Steve Oelrich, R-Cross Creek. "It only addresses how Citizens collects to pay those liabilities."
The bill reduces Citizens' regular assessment from 6 percent per account to 2 percent for coastal property owners and eliminates it altogether for Citizens' personal lines account and commercial policyholders.
To make up the loss, the bill imposes greater levies using emergency assessments, which are charged on most lines of property and casualty policies in the state, including Citizens own policies. (Workers' compensation and medical malpractice policyholders are not assessed.)
The bill would also allow Citizens to levy assessments directly to policyholders. Under current law, insurance companies are required to write a check to Citizens within 30 days after initial assessments are sent out and then collect that back from policyholders after the fact.
The payout requirement keeps some companies away from Florida, said J.D. Alexander, R-Lake Wales.
"They would no longer be the middle man," Alexander said.
The bill was amended to include another hurricane-related issue: the Florida Hurricane Catastrophe Fund. The state-backed fund is responsible for reimbursing insurance companies and their policyholders for up to $17 billion in losses following a major storm that leaves companies unable to pay claims.
The amendment would shrink the hurricane fund over a three-year period from $17 billion to $15 billion, a move that would reduce the risk on Florida taxpayers. The move is expected to result in a small increase in premiums, maybe 2 percent, that Alexander said is justified by the improved stability of the fund.
The decrease could also mean additional business for the private reinsurance market.
Alexander said the change is needed because given the tight credit market, Citizens would already be unable to obtain up to $17 billion from the bond market, much less be able to reimburse policyholders if a second storm hit.
The amendment and the bill have the support of the Office of Insurance Regulation, Citizens board members, the governor's office and the state's leading business groups. It is also supported by the Florida Insurance Consumer Advocate.
"It would be irresponsible not to adjust Citizens insurance the best we can to attract other companies," Oelrich said. "It is also going to put some money away -- literally -- for a rainy day."
The House companion bill (HB 1127) does not contain the CAT fund language. That bill was approved by the House and is now in messages.
